Managing waste is a $55 billion industry. The EPA cites that Americans generate 236 million tons of garbage, of that 30% gets recycled or composted, but the remaining 164 million tons are thrown in the garbage. This has created a big business for managing waste.
Below are four leading companies that have good growth prospects for the future. These companies don’t just pick up trash and dump it into a landfill – they also manage recycling systems via sorting technologies and manage waste to energy facilities.
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Waste Management Inc. (NYSE:WM)
Waste Management is a Houston based company that manages waste for residential, commercial, industrial, and municipal customers in North America. Their services include the collection, transfer, recycling, and disposing of waste. They also rent and service portable restroom facilities under the Port-O-Let name. They’re also involved in processing the methane gas that is naturally created by landfills into a renewable resource.
Waste Management pays a nice dividend of 4.40%. Sales are up 5.7% this year and they are expected to grow earnings annually by 10.30% for the next five years. They are well valued with a forward PE of 12.59, a PEG of 1.46, and the stock trades at only 2.3 times book value per share.
Casella Waste Systems (NASDAQ:CWST)
Casella was founded in 1975 and based in Vermont. They’re currently a small cap company with a market cap of $150.5 million. In addition to managing the collection and recycling of waste, Casella is involved in a joint venture with US Greenfiber to manufacture and sell cellulose insulation which is used in residential housing. They also generate and sell electricity under a contract at a waste-to-energy facility. Casella is currently operating in 14 states. Interestingly, they introduced their first hybrid diesel-electric collection vehicle three years ago in their commitment to reduce greenhouse gas emissions.
Casella’s sales are up 4% this year, but they had earnings of -0.17 this year. Despite this year’s negative earnings, expectations are positive for the next five years as analysts expect them to grow earnings annually at 20%. Their stock, which is trading at $5.60 per share is trading at 1.64 times book value per share. If they can meet or beat their earnings estimates the stock should increase by 20% each year. That would put their stock price at $13.93 5 years from now.
Republic Services Inc. (NYSE:RSG)
Republic is a Phoenix, Arizona based company that was founded in 1996. They currently operate in 40 U.S. states and in Puerto Rico. In addition to providing all of the standard waste collection and recycling services, Republic also operates 73 landfill gas and renewable energy projects consisting of 51 electric plants fueled by landfill gas; 14 medium BTU plants providing landfill gas to industrial users; 6 high BTU plants that provide pipeline quality natural gas; and 2 projects that burn landfill gas to evaporate leachate.
Republic shows good value with a forward PE of 13.68, a PEG of 1.01 and with the stock trading at only 1.42 times book value per share. They pay a handsome 3% dividend and are expected to grow earnings annually at 15.65% for the next five years. This stock is owned by Warren Buffett as he sees the growing amount of waste that is used in this country.
Progressive Waste Solutions (BIN)
Progressive is a Canadian based company that was founded in 2001. Progressive operates in 6 Canadian provinces, in 12 U.S. states, and in Washington D.C. They also handle as aspects of waste management: collection, transfer, recycling, and material recovery.
They pay a 2.3% dividend and are expected to grow earnings annually at 16.4% for the next five years.
Their forward PE looks a little high at 16.89, but their PEG of 1.22 show solid value. With the stock trading at only 1.59 times book value per share, like the other companies mentioned here, Progressive is also well valued.
With the amount of trash growing steadily year over year, and with few new places to put it, we will be continually looking for sophisticated solutions to handle our garbage wisely. These companies all manage waste responsibly by recycling and recapturing landfill gases. With the recent hit that they took in the stock market, now should prove to be a good time to pick them up for the long term (10 – 20 years out).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.