ECL

Ecolab is a high-quality, wide-moat business and the numbers prove it: reported gross margin expanded to 44.5% from 43.5% on what management explicitly attributes to 'strong value pricing,' ROE is a robust 21.2%, and operating cash flow rose 4.9% to $2.95B against $1.05B of capex (roughly $1.9B free cash flow). The five-year arc is one of steady compounding — revenue grew from $12.7B (FY2021) to $16.1B (FY2025) and net income nearly doubled from $1.13B to $2.08B. The MD&A frames 2025 as record sales, margin, adjusted EPS and free cash flow, with organic sales up 3% led by Pest Elimination and the newly standalone Life Sciences segment. This is a company you want to own; the only debate is price.

The near-term headline numbers cooled, and that matters at this multiple. FY2025 reported revenue grew just 2.2%, while net income (-1.7%), operating income (-2.3%) and diluted EPS (-1.2%) all ticked slightly lower year-over-year — the first earnings stall in the five-year series. Much of the gap between strong organic momentum (+3%) and flat reported results is foreign-currency drag, which management neutralizes via fixed-currency reporting, but the GAAP bottom line is what the 37x P/E is valued against. Paying 37x earnings and 4.7x sales for a business growing reported EPS in the low single digits (and down this year) prices in a re-acceleration that the GAAP figures do not yet show.