We recently compiled a list of the 12 Best Waste Management Stocks to Invest In Now. In this article, we are going to take a look at where Clean Harbors, Inc. (NYSE:CLH) stands against the other waste management stocks.
Waste management stocks include those companies that provide supporting environmental, engineering, and consulting services, as well as those that gather, process, store, transport, recycle, and dispose of waste products.
The waste management industry is expanding rapidly. The market was worth $1,293.70 billion in 2022 and is projected to grow at a CAGR of 5.4% between 2023 and 2030, according to Grand View Research. Strict laws like the Resource Conservation and Recovery Act and the Waste Shipment Regulation are anticipated to drive the market to improve this service. In 2022, the collection segment held a dominant market share of over 62.0%. The industrial waste industry dominated the market, accounting for more than 85.9% in 2022. It is anticipated that during the projection period, the e-waste segment will grow at the quickest CAGR of 7.4%. Asia Pacific led the industry, accounting for more than 24.5% of the market in 2022. The projection period is anticipated to see the Middle East and Africa grow at a compound annual growth rate (CAGR) of 5.6%.
According to Debra Reinhart, a Board of Scientific Counselors member for the EPA:
“It’s a difficult industry, but it is profitable if it’s done right.”
Waste management is critical to promoting the growth of sustainable energy by reducing environmental impact, recovering valuable materials, and increasing resource efficiency. According to Deloitte’s insights, land, water, and waste management must all be integrated in order to achieve a sustainable energy transition. Repurposing brownfield sites, abandoned power stations, and landfills for solar or battery storage maximizes land usage, while spatial mapping technologies reduce environmental effects. Water efficiency can be improved by recycling wastewater, using brackish and greywater, and switching to closed-cycle cooling systems. Advanced sorting, material recovery from retired equipment, and robotics are all waste reduction solutions that prioritize safety and efficiency. Moreover, cross-industry collaboration promotes industrial symbiosis, resulting in maximum resource utilization. Circular design concepts help to increase product life and facilitate disassembly. Increased renewable energy efficiency reduces land and waste footprints. Smart sensors and IoT technology reduce water leaks, while industrial sites’ centralized recycling networks reduce freshwater extraction and wastewater outflow. These methods promote a sustainable and resource-efficient energy transition.
According to S&P Global’s October 2, 2024, report, private equity and venture capital investments in the waste management sector were projected to decline further in 2024 as investors moved their focus to circular economy solutions rather than traditional waste services. Global PE and VC-backed deals totaled $247.2 million in 2024, accounting for only 7% of the $3.62 billion reported in 2023, according to S&P Global Market Intelligence. The sector has steadily declined since peaking at $8.87 billion in 2021. The number of transactions declined in 2024 when compared to 2023 and 2022. In Q3 2024, the deal value was $8.3 million, down from $2.42 billion in Q3 2023, with only six transactions compared to 22 in the same period last year.
The report further mentioned that eleven deals were announced in the United States and Canada, with seven deals in Europe and Asia-Pacific each. In terms of deal value, the United States and Canada received $116 million in announced investments, while Europe raised $104.5 million. Waste management enterprises in the Asia-Pacific received $26.7 million in private equity financing.
Looking forward, as per the UN’s Global Waste Management Outlook 2024, municipal solid waste generation is projected to jump from 2.1 billion tonnes in 2023 to 3.8 billion tonnes by 2050. In 2020, direct waste management expenses reached $252 billion, but hidden costs from pollution and climate change boosted the total to $361 billion. Without intervention, annual costs could nearly quadruple to $640.3 billion by 2050. Implementing waste management methods may reduce net expenses to $270.2 billion, whereas a circular economy could result in a $108.5 billion yearly net gain. The report calls on governments, businesses, and citizens to take action to mitigate rising prices and environmental impact.
A truck filled with hazardous waste being safely unloaded at a recycling facility.
Our Methodology
We sifted through holdings of waste management ETFs and online rankings to form an initial list of 30 Waste Management stocks. From the resultant dataset, we chose the top 12 stocks most favored by hedge funds, using Insider Monkey’s database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Clean Harbors, Inc. (NYSE:CLH)
Number of Hedge Fund Investors: 44
Clean Harbors, Inc. (NYSE:CLH) is included among the Best Waste Management Stocks. It is an environmental and industrial service provider. It delivers parts cleaning and environmental services to commercial, industrial, and automotive customers. Its business units are Environmental Services and Safety-Kleen Sustainability Solutions. The majority of the company’s revenue comes from the Environmental Services division.
The firm is the leader in hazardous waste management, with significant entry hurdles, 90% recurring revenue, and great pricing power. Clean Harbors, Inc. (NYSE:CLH)’s competitive advantage consists of owning EPA-approved landfills, high-capacity incinerators, and exclusive contracts for emergency response and industrial services.
In Q4 2024, Clean Harbors, Inc. (NYSE:CLH) reported solid consolidated results, exceeding Street expectations with a 10% EBITDA growth in 2024. It had record sales, adjusted EBITDA, and adjusted free cash flow throughout the year. The Environmental Services division outperformed expectations, increasing revenue by 9% and adjusted EBITDA by 11%. The successful introduction of the Kimball Incinerator in Nebraska improved North American capacity by 12%.
The company launched its Total PFAS solution and performed successful PFAS incineration testing, expecting significant market growth. It is in a good position for strategic expansion prospects because of its low leverage and solid $790 million cash balance.
Risks include cost inflation, margin pressure, and volatility in the Safety-Kleen area, but Clean Harbors, Inc. (NYSE:CLH) has the potential for long-term success.
Bell Global Equities Fund stated the following regarding Clean Harbors, Inc. (NYSE:CLH) in its Q4 2024 investor letter:
“The other new name introduced to the portfolio was Clean Harbors, Inc. (NYSE:CLH), the largest hazardous waste company in North America. We expect Clean Harbors’ demand to grow a little faster than GDP as environmental regulations continue to tighten and the scarcity value of their landfill and incinerator assets allows them to consistently raise prices. Additionally, the onshoring of manufacturing and their Total PFAS solution act as further growth drivers. We initiated the position based on these robust fundamentals, coupled with our belief that the market has yet to fully appreciate the value of these assets and services, a view supported by recent private market transaction prices.”
Overall, CLH ranks 4th on our list of the Best Waste Management Stocks to Invest In Now. While we acknowledge the potential for CLH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CLH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
