Entering text into the input field will update the search result below

Covanta: An Overlooked ESG Play

Mar. 05, 2021 9:36 AM ETCovanta Holding Corporation (CVA)33 Comments
Brandon Newsome profile picture
Brandon Newsome


  • Covanta is the world's largest waste-to-energy company.
  • Compared to dumping in a landfill, the waste-to-energy process removes approximately 1 ton of CO2-equivalent from the atmosphere for each ton of waste processed.
  • Currently, 50% of waste in the U.S. ends up in a landfill.
  • CVA's discounted cash flow valuation shows a fair value of $31.52/share at an 8.6% free cash flow growth rate over 15 years.

Editor's note: Seeking Alpha is proud to welcome Brandon Newsome as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more »

To achieve the broadly held goal of getting to net zero carbon emissions by 2050, we need to evaluate every greenhouse gas-emitting industry for ways in which to reduce its environmental footprint. One such industry that hasn't garnered a lot of attention is waste management. Landfills, which are the destination of 50% of municipal waste in the US, are estimated by the EPA to contribute 15% of the methane emitted in the US each year, a CO2-equivalent to the emissions from 21M passenger cars. A superior and already scalable alternative to landfills are waste-to-energy (WtE) plants, which are estimated to reduce greenhouse gas emissions by 1 ton of CO2-equivalent for each ton of waste processed at the facilities. As the world leader in the WtE industry, I believe Covanta (NYSE:CVA) deserves a place in your portfolio.

Business Overview

So how do Covanta WtE facilities work? Instead of waste being piled into landfills, it's brought to Covanta plants where it's combusted and the resulting hot steam is converted into energy to be fed into the electric grid. Furthermore, heavy metals left over in the resulting ash are recycled and sold back into the market. The gases resulting from the waste combustion are collected, cleaned, and filtered until 99.9% of what comes out of the stack is comprised of normal components of air, including water vapor, nitrogen, oxygen and carbon dioxide.

Covanta Palm Beach FacilityCovanta plant in Palm Beach, Florida; source.

While the facilities do still emit greenhouse gas in the form of carbon dioxide, as mentioned above, overall greenhouse gases

This article was written by

Brandon Newsome profile picture
I look for disruptive companies that are driving the world toward the future. Themes I'm currently digging into include sustainability, empowerment of small businesses, and blockchain.

Analyst’s Disclosure: I am/we are long CVA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.