Clean Harbors currently trades at $290.53 and has been a dream stock for shareholders. It’s returned 225% since June 2021, nearly tripling the S&P 500’s 78.9% gain. The company has also beaten the index over the past six months as its stock price is up 22.2%.
Is now still a good time to buy CLH? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does CLH Stock Spark Debate?
Established in 1980, Clean Harbors (NYSE: CLH) provides environmental and industrial services like hazardous and non-hazardous waste disposal and emergency spill cleanups.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Clean Harbors grew its sales at an exceptional 14.4% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Clean Harbors’s margin expanded by 5.3 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Clean Harbors’s free cash flow margin for the trailing 12 months was 9.1%.
One Reason to Be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Clean Harbors’s revenue to rise by 5.4%, close to its 14.4% annualized growth for the past five years. This projection doesn’t excite us and suggests its newer products and services will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.
Final Judgment
Clean Harbors has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 32.5× forward P/E (or $290.53 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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