A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we discuss about Clean Harbors, Inc. CLH, which is expected to register more than 100% growth in 2018. For 2019, the company’s earnings are anticipated to grow at a rate of 30.9%.
Factors Driving Clean Harbors
Clean Harbors continues to grow with the help of multiple acquisitions in both new and existing markets. Acquisition of the U.S. Industrial Cleaning Business of Veolia Environmental Services North America LLC (the "Veolia Business") in 2018 boosts Clean Harbors’ U.S. Industrial Services business.
In 2017, Clean Harbors completed four acquisitions, which help the company in multiple lines of services such as waste minimization, remodeling of its fleet of trucks, growth in daylighting and hydro excavation services markets, and complement its closed loop model in relation to the sale of oil products.
The company witnessed $108.8 million of direct revenues from the Veolia Business and $18.6 million revenues from its 2017 acquisitions in the first nine months of 2018.
Clean Harbors’ focus on improving its efficiency and lowering operating costs through advanced technology, process efficiencies and stringent cost management are appreciable. By setting-up additional service locations near treatment, storage and disposal facilities (TSDFs), it expects to minimize capital expenditure and increase its market share. This, in turn, is likely to drive additional waste into the company’s existing facilities, thereby, increasing capacity utilization and enhancing operating profit.
We are also impressed by Clean Harbors’ endeavors in rewarding its shareholders in the form of share repurchases. In the first nine months of 2018, Clean Harbors repurchased approximately more than 635,000 shares for $33.6 million. It repurchased shares worth $48.9 million in 2017, $22.2 million in 2016 and $73.3 million in 2015. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its businesses.
Despite significant growth prospects, certain concerns remain. A debt-laden balance sheet may limit Clean Harbors’ future expansion and worsen its risk profile. Also, the company’s demand cycle is highly seasonal. However, we believe that strategic acquisitions and operational efficiency will aid Clean Harbors.
Zacks Rank & Stocks to Consider
Clean Harbors currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Waste Connections WCN, Republic Services RSG and Navigant Consulting NCI, each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Waste Connections, Republic Services and Navigant is 10.7%, 11.7% and 13.5%, respectively.
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