The Zacks Waste Removal Services industry comprises companies that are engaged in the collection, transportation, treatment, disposal, inspection and regulation of any form of waste. The companies serve residential, municipal, commercial and industrial customers in the United States and internationally.
Here are the three major industry themes:
- The industry is mature with growth coming from volume and price increases. Income and cash flow have grown steadily over the past few years, enabling most industry players to pursue acquisitions and other investments. Per a recent report, the global waste management market is expected to reach $530 billion by 2025 from $330.6 billion in 2017, witnessing a CAGR of 6% from 2018 to 2025.
- The coronavirus outbreak has necessitated the proper disposal of trash. In fact, waste management companies are at an advantage in situations such as the recent one, as healthcare officials have to dispose of used masks, gloves, suits, syringes and other medical equipment properly 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 boost the industry.
- 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. Growing adoption of recycling techniques, 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.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Waste Removal Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #105. This rank places it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry’s Share Price Performance
The Zacks Waste Removal Services Industry has declined 12.4% over the past year compared with decline of 20.9% and 18.2% for the broader Zacks Business Services sector and the Zacks S&P 500 composite, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing waste removal services stocks because of their high debt levels, the industry is currently trading at 9.29X compared with the S&P 500’s 8.52X and the sector’s 9.03X.
Over the past five years, the industry has traded as high as 12.26X, as low as 8.68X and at the median of 10.27X, as the charts below show.
With proper disposal of medical waste being a major concern for several countries across the globe amid coronavirus outbreak, the industry stands to benefit from the current scenario. Government initiatives for sustainable waste management; increasing environmental awareness, rising population, rapid industrialization and urbanization and growing adoption of advanced waste collection solutions are other positives, which should continue to drive demand.
We now discuss three stocks from the Zacks Waste Removal Services universe, with the first one carrying a Zacks Rank #2 (Buy) and the rest carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
China Everbright International Limited (CHFFF - Free Report) : This Hong Kong-based investment holding company, provides environmental solutions in the People's Republic of China, Germany, Poland, and Vietnam.
The Zacks Consensus Estimate for current-year EPS has moved up 2.2% in the past 60 days.
Price and Consensus: CHFFF
Republic Services, Inc. (RSG - Free Report) : This Arizona-based company provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico.
The Zacks Consensus Estimate for its current-year EPS has improved 0.9% in the past 60 days.
Price and Consensus: RSG
Waste Management, Inc. (WM - Free Report) : This Texas-based company provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
The Zacks Consensus Estimate for its current-year EPS has remained unchanged in the past 60 days.
Price and Consensus: WM