Heritage-Crystal Clean: Value Out Of Waste

BI Insights
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Summary

  • HCCI stock is trading at the lower end of the last 10-year EV/EBITDA range.
  • The discount is due to a potential bear thesis of HCCI oil business’s margins reverting to a single digit (pre-pandemic level).
  • I believe the fear is overdue and margins should remain above pre-pandemic levels due to IMO 2020 regulation.
  • The remaining business should fare well due to the stable waste disposal business and Patriot acquisition.

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Milos Dimic

Heritage-Crystal Clean (HCCI) is currently trading at attractive valuations, primarily driven by investors' concerns about the potential reversion of margins in the Oil business to pre-pandemic levels, which were in the single-digit range. However, I believe that such fears are unfounded, and the segment is unlikely

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