Let’s analyze three companies involved in these services.
Good quarter results and stronger position
Ecolab Inc. (NYSE:ECL) sells products and services for the hospitality, healthcare, foodservice, and industrial markets.
The company’s first-quarter experienced a 20% increase in its earnings of $0.60 per share.
Revenue increased 2% to $2.87 billion year-over-year powered by global food & beverage and global specialty sales’ growth. North America and Europe remain sluggish, but Latin America and Asia Pacific are showing strong gains for the company. The bottom line was benefited by an improved operating margin coupled with lower interest expense and a lower tax rate.
In order to expand its business, the company continues to invest in strategic areas such as food, water, healthcare, energy, and global pest elimination. The Champion Technologies acquisition for $2.3 billion will complement the company’s energy business, which is under restructuring. Cost synergies will be $25 million this year and management expects to reach $150 million annually by 2015.
The company operates in 72 countries outside of the U.S. Its overseas presence boosts sales and it is driving growth. I believe this will continue as long as the emerging markets continue to grow. Ecolab Inc. (NYSE:ECL) recently bought Mexico-based Quimiproductos with the intention of building a stronger presence in LatAm. Despite the region’s high natality, its population is aging as well.
The only risks I see in this company are acquisition and integration-related. Ecolab Inc. (NYSE:ECL)’s operations are big and its continued expansion could make it face some financial difficulties in some business units which should be taken into account.
A solid company to consider
Healthcare Services Group, Inc. (NASDAQ:HCSG) manages and provides administrative and operating services to the healthcare industry’s facilities throughout the United States.
Revenues for the company have increased over 5% year over year, reaching $273 million for its first quarter 2013. Net income rose 74% to almost $15 million, which allowed a cash dividend of $0.16 per share.
Healthcare Services Group, Inc. (NASDAQ:HCSG) operates in almost 7,000 hospitals and has over 3,500 facilities. This makes the company the largest housekeeping and laundry service provider to the health care industry. Such outstanding market penetration along with its 90% client retention rate will secure long term profits for investors.
The company’s cash conversion cycle, which is how fast Healthcare Services Group, Inc. (NASDAQ:HCSG) turns its cash outflows into cash inflows, is fairly low (43.2 for the trailing 12 months). That means that the company’s money is not stuck in inventory and/or accounts receivable for too long and is available for making the company grow and pay dividends. This a good sign to take into consideration, since it shows a sustainable growth.
Revenues for the company have always increased and almost doubled since 2007. With only one exception, Healthcare Services Group, Inc. (NASDAQ:HCSG) has been increasing its quarterly cash dividends since 2003, when it started paying dividends. This is another extra reason why you should consider this company.
Bottom line
Ecolab Inc. (NYSE:ECL)’s ability to deliver double-digit earnings growth is impressive and is a strong reason to buy this stock. I would but Ecolab Inc. (NYSE:ECL) and keep it.
I am very optimistic about Healthcare Services Group, Inc. (NASDAQ:HCSG). It is an exceptional company with great investment potential. I would definitely invest in this stock.
The article How to Profit From the Graying of America originally appeared on Fool.com and is written by Louie Grint.
Louie Grint has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Louie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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