Ecolab Inc. (NYSE:ECL) had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$226 to US$248. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Ecolab's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What Is Ecolab Worth?

According to our valuation model, Ecolab seems to be fairly priced at around 3.6% below our intrinsic value, which means if you buy Ecolab today, you'd be paying a reasonable price for it. And if you believe the company's true value is $250.24, then there isn't much room for the share price grow beyond what it's currently trading. Although, there may be an opportunity to buy in the future. This is because Ecolab's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Ecolab generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Ecolab's earnings over the next few years are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ECL's positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you've been keeping tabs on ECL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Ecolab at this point in time. At Simply Wall St, we found 1 warning sign for Ecolab and we think they deserve your attention.

If you are no longer interested in Ecolab, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.