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Reviewing Ecolab (ECL) and Valvoline (VVV)

Valvoline (NYSE: VVV) and Ecolab (NYSE:ECL) are both mid-cap basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, valuation, earnings, profitability, analyst recommendations, dividends and institutional ownership.

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Insider and Institutional Ownership

92.3% of Valvoline shares are held by institutional investors. Comparatively, 75.4% of Ecolab shares are held by institutional investors. 0.1% of Valvoline shares are held by company insiders. Comparatively, 1.5% of Ecolab shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Valvoline and Ecolab’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Valvoline 13.00% -106.06% 14.55%
Ecolab 9.66% 18.93% 6.97%

Dividends

Valvoline pays an annual dividend of $0.20 per share and has a dividend yield of 0.8%. Ecolab pays an annual dividend of $1.48 per share and has a dividend yield of 1.1%. Valvoline pays out 15.5% of its earnings in the form of a dividend. Ecolab pays out 33.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Ecolab has raised its dividend for 31 consecutive years. Ecolab is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Valvoline and Ecolab, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Valvoline 0 6 5 0 2.45
Ecolab 0 8 6 0 2.43

Valvoline presently has a consensus target price of $25.40, indicating a potential upside of 6.45%. Ecolab has a consensus target price of $132.67, indicating a potential upside of 1.61%. Given Valvoline’s stronger consensus rating and higher possible upside, analysts clearly believe Valvoline is more favorable than Ecolab.

Earnings and Valuation

This table compares Valvoline and Ecolab’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Valvoline $2.03 billion 2.38 $520.00 million $1.29 18.50
Ecolab $13.36 billion 2.83 $2.89 billion $4.38 29.81

Ecolab has higher revenue and earnings than Valvoline. Valvoline is trading at a lower price-to-earnings ratio than Ecolab, indicating that it is currently the more affordable of the two stocks.

Summary

Ecolab beats Valvoline on 10 of the 16 factors compared between the two stocks.

Valvoline Company Profile

Valvoline Inc. (Valvoline) is engaged in the production and distribution of automotive, commercial and industrial lubricants, and automotive chemicals. The Company operates through three segments: Core North America, Quick Lubes and International. The Core North America segment sells Valvoline, and other branded and private label products in the United States and Canada to both consumers performing their own automotive maintenance, referred to as Do-It-Yourself (DIY) consumers, as well as, to installer customers using Valvoline products to service vehicles owned by Do-It-For-Me (DIFM) consumers. Its Quick Lubes segment services the passenger car and light truck quick lube market through platforms, including its franchised Valvoline Instant Oil Change (VIOC) stores and Express Care. Its International segment sells Valvoline and other branded products through its affiliates, joint ventures, licensees and independent distributors. Its products include All Climate, DuraBlend and MaxLife.

Ecolab Company Profile

Ecolab Inc. provides water, hygiene and energy technologies and services. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors in over 170 countries. Its segments include Global Industrial, Global Institutional, Global Energy, Other and Corporate. Its Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Its Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site and technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. The Company’s Other segment consists of the Pest Elimination and Equipment Care operating units.