Ecolab (NYSE:ECL)

With a team of more than 23,000 employees and 55 factories Worldwide, Ecolab has been the benchmark in the hygiene market for industry and institutions since 1923 in more than 160 countries. Ecolab manufactures and sells cleaning and disinfecting products for consumer service businesses and healthcare industries. Ecolab also sells cleaning equipment, but it must be used with the company's chemicals. In that sense, it's reminiscent of rival Clorox (NYSE:CLX), which markets the Scooba robot vacuum/cleaner with its own products.

Ecolab salespeople frequently visit their customers and act as cleaning consultants, identifying areas where customers can improve cleanliness and avoid negative publicity from situations such as food contamination. According to Morning Star, These two strategies have earned Ecolab approximately 10% of the global market industrial and institutional cleaning and disinfection products. Between November and December 2006, 71 people in New Jersey, New York, Pennsylvania and Delaware were infected with E. coli after eating at Taco Bell restaurants. Due to the E. coli outbreak, Taco Bell was forced to remove onions from its 5,800 restaurants and temporarily close 15 of its restaurants Philadelphia. To prevent similar events from occurring in their establishments, other restaurants and fast food chains have increased their cleaning and disinfection budgets. Increased public attention to food hygiene in late 2006 led to increased demand for Ecolab products. THE income increased by 9% in 2007. The Taco Bell story is reminiscent of some recent E. Coli infections closer to home...

Ecolab offers a fairly modest current yield of 1.4%, slightly above its long-term average (1.3%). The payout growth is more attractive, at 10.67% per year. Ecolab has also increased its dividend for 19 consecutive years. The payout ratio is very conservative, at 30.47%, leaving the company with a good margin to increase its dividend, even in the event of a difficult transition. This ratio is explained in particular by the strong increase in earnings per share over the past year.

Volatility is low, at 9.44%, lower even than our portfolioThe beta is also low, at 0.69, and reflects the Ecolab's low sensitivity to market fluctuationsThe price-to-earnings ratio of 25.00 and the low yield mentioned above give us an idea of the excessive current value of the stock.

ECL has been showing steady growth in its share price for years. The company has weathered the two bear markets of the "lost decade" with true insolence. This impressive performance explains the current overvaluation of the title.

Ecolab has the advantage of knowing how to take advantage of a drop in the dollar. This is the advantage of a company that has been able to diversify its markets from a geographical point of view. Let us note, however, that although appreciable, this reactivity is not extraordinary either.

Ecolab is a good dividend payer, with a low payout ratio, low volatility and market sensitivity, good revenue growth and decent resilience to dollar fluctuations. However the title is too expensive at the moment, both from a profit and dividend perspective. So we are keeping it in mind for a future opportunity.