In this article, we shall discuss the 12 best recycling stocks to buy now. To skip our detailed analysis of the global waste recycling services industry in 2023, go directly and see 5 Best Recycling Stocks To Buy Now.
According to a market research report by Precedence Research, the global waste recycling services market was projected to be around $58 billion in 2022 and is expected to rise to $91.4 billion by 2032, at a CAGR of 4.7% during the forecast period 2023-2032. The market was largely dominated by the Asia Pacific region, which managed to garner a market share of more than 45% as of 2022. This is largely owing to increased industrialization and government policies geared at attracting FDI. As the region emerges as the largest manufacturing hubs in the world, countries like China and India are becoming increasingly eminent in foreign markets due to their potential for manufacturing goods at substantially low costs. Furthermore, the generation of large amounts of e-waste, primarily driven by the increased adoption of consumer electronics and various other electronic devices is expected to catalyze and exacerbate the growth of the larger waste recycling services market in 2024. A substantial portion of the overall market share is also held by North America and Europe, primarily driven by an enhanced awareness around the benefits of waste management and increased government initiatives to promote sustainability. Some of the largest waste recycling markets in the aforementioned regions are Germany, Austria, and Wales, which have a cumulative recycling rate of 52% and have some of the best recycling stocks to buy. To put this in perspective, the entire recycling rate in the United States in 35% as of 2022. As the world races to achieve net-zero targets, government policies around greener waste management are expected to grow more stringent, further driving the growth of the waste recycling services industry during the forecast period 2023-2032. Some of the largest players in the recycling space and the best recycling stocks to buy now are Waste Connections, Inc. (NYSE:WCN), Republic Services Inc. (NYSE:RSG), and LKQ Corporation (NASDAQ:LKQ). To read more on the waste recycling industry, check out our article on the 15 Biggest Recycling Companies in the World.
Opportunities for Growth In Recycling: An Overview
As companies around the world race to meet sustainability objectives by catalyzing a shift away from fossil fuels, especially in the 25 Cleanest Countries in the World in 2023, numerous consumer-packaged-goods (CPG) companies have begun to sell goods which have the least negative impact on the environment. Consequently, the demand for circular polymers has been skyrocketing; however, capacity announcements do not seem to be at par with the surge in demand. According to a report by McKinsey, the global recycling industry offers a potential solution, in that it can not only expand the types of plastics which are recyclable but also develop plastics which have tailored molecular weight distributions and comonomers which are highly adept for high-value applications, like flexible packaging of food. Top players in the recycling business like Waste Connections, Inc. (NYSE:WCN), Republic Services Inc. (NYSE:RSG), and LKQ Corporation (NASDAQ:LKQ) are diverting increased investments towards the recycled polymers segment, understanding that demand is on the rise due to increasing consumer awareness, CPG pledges, and stringent governmental regulations. These plastics can be manufactured through both, mechanical and advanced recycling. The best recycling stocks to buy now are increasingly focusing on the development of technology which will facilitate scale and reliability. However, the report also warns that there are steep learning curves associated with this transition as total yield, efficiency, and reliability are slated to skyrocket with the passage of time. Companies like Waste Connections, Inc. (NYSE:WCN), Republic Services Inc. (NYSE:RSG), and LKQ Corporation (NASDAQ:LKQ) are also building out infrastructure and sortation to ensure feedstock availability and simultaneously setting up end-to-end partnerships to achieve at-scale investment.
Furthermore, to minimize market disconnects which tend to be exacerbated by unaligned quality of feedstock, the recycling industry can also invest in feedstock preparation facilities (FPFs) to enhance the quality of bales. Additionally, FPFs have the potential to aggregate and upscale plastic waste to meet the requirements of downstream processors. Investing in this system will demand enhance collaboration between the advanced recycling industry and the waste industry. This can be done by supporting additional sortation expenditure via premiums for recycled products, supporting collaborative action between waste and chemical companies, and cleaning the waste stream by getting rid of contaminants.
Dmitry Kalinovsky/Shutterstock.com
Our Methodology
To compile our list of the 12 best recycling stocks to buy now, we first made a list of the 30 largest recycling companies in the world in terms of their market capitalization. Some companies are pure-play recycling companies while others generate a significant portion of their annual revenue through different recycling segments, namely either waste recycling, battery recycling, advanced plastics recycling, etc. Then, we picked 12 stocks with strong fundamentals, positive analyst ratings, or a favorable hedge fund sentiment. The stocks have been ranked based on the number of hedge funds which hold stakes in them as of Q3 2023, from lowest to highest.
Many of these companies also feature in our article on the 12 Best Waste Management Stocks to Buy Now.
Best Recycling Stocks To Buy Now
12. Aqua Metals Inc. (NASDAQ:AQMS)
Hedge Fund Holdings: 1
Based in Reno, Nevada, Aqua Metals Inc. (NASDAQ:AQMS) is an American company which focuses on the recycling of lead through a novel, proprietary, and patent-pending process called AquaRefining. In Q3 2023, Aqua Metals Inc. (NASDAQ:AQMS) beat EPS estimates of -$0.05 by $0.01, generating earnings of -$0.04 per share. On November 4, Oppenheimer decreased the price target on Aqua Metals Inc. (NASDAQ:AQMS) to $6 from $7, and maintained an Outperform rating on the shares. According to the analyst, the stock is an attractive option in the small-cap segment with a 163% upside. With a strong Q3 2023 performance and robust fundamentals in place, the company is well-positioned to ward to macroeconomic headwinds and generate profit for the investor through its innovative recycling operation. The share price is also undervalued, making for an excellent entry point for the long-term investor.
11. Quest Resource Holding Corporation (NASDAQ:QRHC)
Hedge Fund Holdings: 6
Headquartered in The Colony, Texas, Quest Resource Holding Corp. (NASDAQ:QRHC) is an American company which manages the operational waste of corporate clients by delivering tailored waste solutions which increase efficiencies, improve sustainability, and minimize degradation. Although the company has garnered significant debt, analysts are certain that Quest Resource Holding Corporation’s (NASDAQ:QRHC) strong balance sheet and robust fundamentals will provide it with the leverage needed to successfully navigate these headwinds. It is an ESG pure-play company which is likely to benefit from an increased global focus on sustainability driving interest in landfill diversion. The company has strong financial leverage with more than 30% of incremental gross profit seamlessly transitioning to EBITDA. The stock is expected to generate more than 20% of its overall market cap in FCF by 2024, making it one of the best recycling stocks to buy now.
10. Stericycle Inc. (NASDAQ:SRCL)
Hedge Fund Holdings: 16
Based in Bannockburn, Illinois, Stericycle Inc. (NASDAQ:SRCL) is an American compliance company which focuses on the collection, disposal, and recycling of regulated medical waste and sharps, pharmaceuticals, and hazardous waste. It also provides services for recalled and expired goods. On November 4, RBC cut the price target on Stericycle Inc. (NASDAQ:SRCL) to $58 from $62, but maintained an Outperform rating on the stock. As per the analyst, the company is aiming to generate an impressive +13%-17% EBITDA expansion per year for the forecast period 2023-2027 and shows inclination and potential to indulge in accretive acquisitions, having completed more than 17 business sales since 2018. The analysts opines that Stericycle Inc. (NASDAQ:SRCL) intends to divert greater focus on value-accretive divestments and business sales in the near future, making it an attractive long-term buy. According to CCO Cory White in Stericycle’s (NASDAQ:SRCL) Q3 2023 earnings call transcript:
“Overall, the rollout of the ERP was a success. We have had no significant system issues. Orders are being created, stops are being routed, container’s are being tracked Waste is being picked up, treated and properly disposed and invoices are being created and processed for both regulated waste and compliance services and secure information destruction customers. Along this journey, we have been in frequent contact with our customers, and they are not reporting any major disruptions. We track customer satisfaction trends weekly across our customer base. During the first couple of weeks of September, our customer satisfaction scores understandably dropped as some of our customers experienced short-term disruption. Our scores have since improved and are already above pre-go-live levels.”
9. PureCycle Technologies Inc. (NASDAQ:PCT)
Hedge Fund Holdings: 20
Based in Orlando, Florida, PureCycle Technologies Inc. (NASDAQ:PCT) is an American company which focuses on the recycling of polypropylene plastic waste into like-new plastic. In Q3 2023, investor interest around PureCycle Technologies Inc. (NASDAQ:PCT) increased, with 20 funds long the stock. This was up from 17 funds in the preceding quarter. As of the third quarter of 2023, the company generated an EPS of $0.03, beating estimates of -$0.16 by $0.19.
On November 10, Oppenheimer upgraded the price target on PureCycle Technologies Inc. (NASDAQ:PCT) to $18 from $14, and maintained an Outperform rating on the stock. According to the analyst, the company’s Ironton facility going online supports a robust growth outlook for the stock. Although the stock is speculative and high-risk, the analyst remains confident about several positive developments and catalysts going into 2024, most notably the consistent output of UPR pellets from the Ironton facility which has now reached more than 50% capacity. This is an incredibly critical step as the company transitions to a revenue-producing organization. Furthermore, PureCycle Technologies Inc. (NASDAQ:PCT) has also been able to obtain substantial funds to the tune of more than a $150 million extension to 2025, with respect the revolving line of credit. Although the analyst cautions skepticism, there is resounding confidence around the expected growth trends which are thought to be moving in the right direction.
8. Casella Waste Systems Inc. (NASDAQ:CWST)
Hedge Fund Holdings: 22
Based in Rutland, Vermont, Casella Waste Systems Inc. (NASDAQ:CWST) is an American waste management company which boasts an extensive infrastructure of recycling, collection, organics, and disposal locations. On November 28, Wells Fargo initiated coverage of Casella Waste Systems Inc. (NASDAQ:CWST) with an Overweight rating and a $95 price target. According to the analyst, the company generated an impressive Q3 2023 performance with a revenue growth of more than 19.5%, driven by strategic acquisitions and robust pricing mechanisms. The drop in waste volumes globally, such as residential accounts, is perfectly in line with Casella Waste Systems’ (NASDAQ:CWST) tactics of reserving its resources to cater to high-margin contracts only. Furthermore, the company is increasingly well-positioned to resist inflationary pressures and drive margin expansion through pricing growth is a positive indicator for future performance.
7. Clean Harbors Inc. (NYSE:CLH)
Hedge Fund Holdings: 24
Based in Norwell, Massachusetts, Clean Harbors Inc. (NYSE:CLH) is an American company which focuses on providing environmental and industrial services, such as hazardous waste disposal for companies, governments, and small waste generators. On November 3, BMO Capital lowered the price target on Clean Harbors Inc. (NYSE:CLH) to $176 from $186, but maintained an Outperform rating on the shares. The analyst maintained that the company’s Q3 2023 results are not entirely an accurate depiction of the Clean Harbors’ (NYSE:CLH) financial health as it was impacted by plant challenges, resulting in lower production and sales volume. However, despite pressure, the company managed to enhance production levels in Q3 2023. Furthermore, revenue for Clean Harbors Inc. (NYSE:CLH) was up 0.19% year-over-year, coming in at about $1.37 billion in Q3 2023. This was up significantly as compared to Q3 2022, when revenue stood at $1.35 billion. After comparing the forward P/E ratio of 19.04x with the sector median of 19.73x, the analyst is certain that the company is one of the best recycling stocks to buy now.
6. GFL Environmental Inc. (NYSE:GFL)
Hedge Fund Holdings: 26
Headquartered in Toronto, Canada, GFL Environmental Inc. (NYSE:GFL) is a Canadian waste management company which provides environmental services to municipal, residential, commercial, industrial, and institutional clients. GFL Environmental Inc. (NYSE:GFL) beat EPS estimates of $0.21 by $0.02, generating earnings of $0.23 per share in 2023. The company also has a dividend yield of 0.18% as of Q3 2023. On November 7, TD Cowen initiated coverage of GFL Environmental Inc. (NYSE:GFL) with an Outperform rating and a $40 price target. According to the analyst, the company is consistently demonstrating improving financial trends, with skyrocketing revenue, enhanced gross profit margin, and soaring earnings per share. Furthermore, the stock is expected to see growth, reduce debt and improved margin spreads during the first quarter of 2024, making GFL Environmental Inc. (NYSE:GFL) an ideal pick for the long-term investor.
Click to continue reading and see 5 Best Recycling Stocks To Buy Now.
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Disclosure: None. 12 Best Recycling Stocks To Buy Now is originally published on Insider Monkey.
