We came across a bullish thesis on Enviri Corp (NVRI) on ValueInvestorsClub by frankie3. In this article we will summarize the bulls’ thesis on NVRI. Enviri shares were trading at $8.05 when this thesis was published, vs. closing price of $10.33 on Sep 18.
A truck filled with hazardous waste being safely unloaded at a recycling facility.
Enviri (NVRI), formerly known as Harsco, stands out in the environmental services sector with a strong focus on waste management, recycling, and resource recovery. The company’s evolution into a dedicated environmental solutions provider is marked by a strategic rebranding and a commitment to addressing critical industry challenges, particularly in the steel and metals sectors. Enviri’s unique position is underscored by its comprehensive service offerings, which include on-site operational support, waste processing, and the development of eco-friendly products from industrial byproducts.
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With operations spanning approximately 150 sites in 30 countries, Enviri serves a diverse clientele that includes major players like ArcelorMittal, Gerdau, and Tata Steel Group. This extensive network not only highlights the company’s significant market reach but also reinforces its capability to deliver essential services that help clients navigate increasing environmental regulations and reduce their carbon footprints. Enviri’s core services, such as resource recovery and metal recycling, focus on transforming waste into valuable products, thereby enabling clients to achieve zero-waste solutions that preserve natural resources.
The company’s revenue streams are diversified across three main segments: Harsco Environmental, Clean Earth, and Rail. Harsco Environmental leads with robust partnerships in the metals industry, providing critical waste management services that enhance operational efficiency and sustainability. Clean Earth specializes in hazardous waste processing and recycling, addressing the growing regulatory pressures associated with waste management, particularly regarding contaminants like PFAS (per- and polyfluoroalkyl substances). The Rail segment, while recently facing challenges due to unprofitable contracts, still generates substantial revenue and is expected to rebound as these contracts expire.
Investing in Enviri now presents a compelling opportunity, especially as the company embarks on a multi-year transformation aimed at unlocking shareholder value. Despite being overleveraged with a current leverage ratio of 4.1, Enviri’s management has demonstrated confidence through insider buying, signaling their belief in the company’s recovery and growth potential. The stock trades at a mere 5.8x EBITDA, significantly below the average multiple of 10-12x seen among peers in the waste management industry. This discrepancy reflects the market’s hesitance rather than Enviri’s inherent value, particularly given its potential to generate substantial cash flow and improve EBITDA through operational efficiency and strategic asset sales.
Over the next few years, Enviri is expected to generate between $200 million to $300 million in cash flow, enabling it to reduce its leverage. If the company successfully implements its self-help initiatives, such as divesting non-core assets and optimizing its operations, it could see its valuation improve markedly. Analysts project that by 2027, the company could trade at an 8x EBITDA multiple, which could elevate the stock price to $25 per share from its current price of $8.
However, risks remain, including the potential inability to delever quickly and the challenges posed by industry regulations. Yet, the company’s proactive strategies, including plans to offload non-core assets and a focus on high-demand services like PFAS remediation, position it favorably for future growth. In conclusion, Enviri is poised for a turnaround, making it an attractive investment for those looking to capitalize on its potential in the burgeoning environmental services market. The combination of strategic initiatives, a supportive regulatory environment, and a commitment to sustainability underlines why NVRI stock deserves a place in your investment portfolio.
NVRI is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held NVRI at the end of the second quarter which was 14 in the previous quarter. While we acknowledge the potential of NVRI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVRI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.