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Clean Harbors (CLH) Hits Fresh High: Is There Still Room to Run?

Zacks Equity Research

Have you been paying attention to shares of Clean Harbors (CLH)? Shares have been on the move with the stock up 7.5% over the past month. The stock hit a new 52-week high of $80.06 in the previous session. Clean Harbors has gained 54% since the start of the year compared to the 32.9% move for the Zacks Business Services sector and the 26% return for the Zacks Waste Removal Services industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 31, 2019, Clean Harbors reported EPS of $0.66 versus consensus estimate of $0.62 while it missed the consensus revenue estimate by 0.78%.

For the current fiscal year, Clean Harbors is expected to post earnings of $1.9 per share on $3.42 billion in revenues. This represents a 50.79% change in EPS on a 3.71% change in revenues. For the next fiscal year, the company is expected to earn $2.32 per share on $3.56 billion in revenues. This represents a year-over-year change of 22.06% and 3.89%, respectively.

Valuation Metrics

Clean Harbors may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Clean Harbors has a Value Score of C. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 39.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.1X versus its peer group's average of 10.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Clean Harbors currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Clean Harbors passes the test. Thus, it seems as though Clean Harbors shares could have a bit more room to run in the near term.



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