Is it safe to buy Ecolab shares after surpassing Q3 expectations?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 26, 2021
  • Ecolab shares on Tuesday rallied 3.34% after announcing its most recent quarterly results.
  • The company reported its fiscal third-quarter results before markets opened, beating analyst estimates.
  • Although Ecolab offers exciting growth prospects, its valuation seems a little steep.

On Tuesday, Ecolab Inc. (NYSE:ECL) shares advanced by 3.34% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings before markets opened, beating analyst expectations.

Ecolab posted non-GAAP earnings per share of $1.38, outperforming the consensus for analyst expectations of $1.30. However, its GAAP EPS of $1.12, fell short of the Street forecast of $1.26, while revenue for the quarter grew by nearly 10% from the same quarter a year ago to $3.32 billion, $60 million ahead of estimates.

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Although Ecolab shares spiked to retest current 52-week highs of about $231 after Tuesday’s post-earnings rally, the stock is up 6.83% this year, leaving room for more upward movement in the tail-end of the year.

Ecolab’s exciting growth

From an investment perspective, Ecolab shares trade at steep trailing 12-month and forward P/E ratios of 62.69 and 36.73, respectively. Therefore, value investors may opt for alternatives in the market.

However, with analysts expecting earnings to grow by 24.51% next year, before rising at an average annual rate of 16.13% over the next five years, the stock could be a compelling option for long-term investors.

Source – TradingView

Technically, Ecolab shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has rallied closer to the overbought conditions of the 14-day RSI, pushing the stock price towards the trendline resistance.

Therefore, investors could target potential pullback profits at about $223.98, or lower at $218.57, while $233.78 and $238.75 are crucial resistance zones.

It could be time to take some profits

In summary, with Ecolab shares trading closer to the current 52-week highs, the current valuation multiples may persuade investors to take profits. 

In addition, the stock has recently rallied closer to the overbought conditions of the 14-day RSI. Therefore, although the ECL stock offers exciting growth prospects, it may be best to wait for the price to retest current support levels before buying.

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