The coronavirus outbreak has necessitated the proper disposal of waste. In fact, waste management companies are at an advantage in situations such as the ongoing pandemic as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly, in order to curb the spread of infection. Government initiatives, as well as stringent rules and regulations to advance sustainable waste management mechanisms and put a check on illegal dumping, are also expected to aid the industry.
Growing adoption of recycling techniques, and development of technologies and advanced waste collection solutions are key trends within the industry. Recycling remains a major growth area, with most industry players undertaking municipal solid waste- and non-hazardous industrial waste-recycling measures. Rising environmental concerns, rapid industrialization, increase in population and an expected increase in non-hazardous waste as a result of rapid economic growth should enhance business opportunities for waste management companies.
Given this encouraging backdrop, it is not a bad idea to undertake a comparative analysis of two waste removal services industry stocks — Clean Harbors (NYSE:CLH), Inc. CLH and Waste Management (NYSE:WM), Inc. WM. Both stocks are part of the broader Zacks Business Services sector (one of the 16 Zacks sectors). While market capitalization of Clean Harbors is $5.29 billion, that of Waste Management is $64.29 billion.
As both stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Clean Harbors clearly scores over Waste Management in terms of price performance. So far this year, shares of Clean Harbors have gained 30.1%, outperforming the 29.5% rally of Waste Management and 10.8% growth of the industry.
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Earnings Surprise History
Earnings surprise history helps investors get an idea of the company’s performance in previous quarters.
Both Clean Harbors' and Waste Management's earnings surpassed the Zacks Consensus Estimate in each of the previous four quarters. However, Clean Harbors delivered a higher average earnings surprise of 101.5% compared with Waste Management’s 6.3%.
Earnings Estimate Revisions
The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Over the past 90 days, the Zacks Consensus Estimate for Clean Harbors’ current-quarter earnings has improved 34.2% while the same for Waste Management has grown 0.8%.
For 2021, Clean Harbors’ earnings estimates have improved 28.5% compared with an increase of 2.7% for Waste Management. For 2022, Clean Harbors’ earnings estimates have surged 7.2% compared with an increase of 3% for Waste Management.
Based on quarterly and yearly earnings estimate revisions in the past 90 days, Clean Harbors is better placed than Waste Management.
Valuation
EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization) ratio is the commonly used metric for valuing waste removal services stocks because of their high debt levels.
We observe that Clean Harbors and Waste Management have EV/EBITDA ratios of 10.4 and 15.3, respectively, compared with the industry’s figure of 11.3. Clean Harbors has an edge over Waste Management with a lower EV/EBITDA value.
Net Margin
Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.
With a TTM net margin of 9.7%, Waste Management not only compares favorably with the industry’s figure of 7.4%, but also has a lead over Clean Harbors’ 5.5%.
Bottom Line
Our comparative analysis shows that Clean Harbors scores over Waste Management in terms of price performance, earnings estimate revisions and earnings surprise history. However, Waste Management enjoys an advantage in terms of net margin.
Despite a faster share price rally so far this year, Clean Harbors has a lower valuation compared with Waste Management.
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Waste Management, Inc. (WM): Free Stock Analysis Report
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