Ecolab Inc. (ECL): I Am Adding Health, Wealth, and Prosperity to My Portfolio

The company has shown past success in growing within these developing markets, which I view as key targets for the future. In 2012, its “International Cleaning, Sanitizing & Other Services” segment accounted for 27% of revenue while “Global Water” contributed 18%. Africa and the Middle East have both factored heavily in this success. While growth in these two segments is likely, I see Ecolab Inc. (NYSE:ECL) growing in these geographies for other reasons as well.

Taking a different direction at the intersection sets you on the path to the “Global Energy” division that contributed 19% to 2012 revenues. Expect that 19% to be a much higher share in 2013. Why? Because management clearly believes, like I do, in global energy growth, exhibited by the closing of its acquisition of Champion in April of this year. In my mind, this purchase (at just 1.77 times 2012 revenue) makes perfect sense.

The newly combined subsidiary of Nalco-Champion is now an energy industry leader in sustainable solutions and specialty chemical products, from the upstream right through to the petrochemical process. By making energy production more sustainable, operations such as Nalco-Champion’s could help spur development in countries whose water supplies don’t match up with those in more liquid parts of the world.

Sealing the deal
The past year has been very kind to Ecolab Inc. (NYSE:ECL) shareholders, given that shares have nearly doubled the return of the S&P 500 over that time frame. This has left the company priced at a premium to its closest peers – 33 times trailing-12-month earnings. Despite this, I am confident that growth opportunities for this company warrant the multiple.

Already, the Champion acquisition is exceeding expectations, signs of Europe emerging from its recession are coming to light, and revenue from Asia and Latin America is beginning to represent a bigger piece of the overall pie for Ecolab Inc. (NYSE:ECL). Don’t take this as a sign of domestic or European weakness either. All five geographic regions which it reports have shown flat or positive sales growth over the past three years.

In summation, by adding Ecolab Inc. (NYSE:ECL) to my Motley Fool Real-Money portfolio, I am gaining access to growing global trends, sound fundamentals, and a management team clearly capable of growing organically or through mergers and acquisitions. Check back in on the company’s progress or add it to your watchlist to follow along.

The article I Am Adding Health, Wealth, and Prosperity to My Portfolio originally appeared on Fool.com is written by Taylor Muckerman.

Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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