Critical Survey: Advanced Disposal Services (ADSW) & Covanta (CVA)

Advanced Disposal Services (NYSE: ADSW) and Covanta (NYSE:CVA) are both mid-cap business services companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, dividends, institutional ownership and risk.

Valuation & Earnings

This table compares Advanced Disposal Services and Covanta’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Advanced Disposal Services $1.40 billion 1.52 -$30.40 million ($0.28) -86.32
Covanta $1.70 billion 1.31 -$4.00 million ($0.51) -33.24

Covanta has higher revenue and earnings than Advanced Disposal Services. Advanced Disposal Services is trading at a lower price-to-earnings ratio than Covanta, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Advanced Disposal Services has a beta of -0.7, suggesting that its stock price is 170% less volatile than the S&P 500. Comparatively, Covanta has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500.

Dividends

Covanta pays an annual dividend of $1.00 per share and has a dividend yield of 5.9%. Advanced Disposal Services does not pay a dividend. Covanta pays out -196.1% of its earnings in the form of a dividend.

Institutional and Insider Ownership

96.5% of Advanced Disposal Services shares are owned by institutional investors. Comparatively, 94.8% of Covanta shares are owned by institutional investors. 1.2% of Advanced Disposal Services shares are owned by insiders. Comparatively, 11.6% of Covanta shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Advanced Disposal Services and Covanta, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Advanced Disposal Services 0 2 6 0 2.75
Covanta 0 1 6 0 2.86

Advanced Disposal Services presently has a consensus price target of $26.00, suggesting a potential upside of 7.57%. Covanta has a consensus price target of $18.14, suggesting a potential upside of 7.04%. Given Advanced Disposal Services’ higher probable upside, equities analysts plainly believe Advanced Disposal Services is more favorable than Covanta.

Profitability

This table compares Advanced Disposal Services and Covanta’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Advanced Disposal Services -1.61% 5.84% 1.41%
Covanta -3.68% -12.66% -1.11%

Summary

Covanta beats Advanced Disposal Services on 8 of the 15 factors compared between the two stocks.

Advanced Disposal Services Company Profile

Advanced Disposal Services, Inc. is an integrated provider of non-hazardous solid waste collection, transfer, recycling and disposal services operating primarily in secondary markets or under exclusive arrangements. The Company’s segments include South, East, Midwest and Corporate. As of December 31, 2016, the Company had its presence in 16 states across the Midwest, South and East regions of the United States, as well as in the Commonwealth of the Bahamas, served approximately 2.7 million residential customers and over 200,000 commercial and industrial (C&I) customers through its network of 90 collection operations, 72 transfer stations, 21 owned or operated recycling facilities and 39 owned or operated active landfills. The Company’s vertically integrated environmental services operations can be classified into three lines of business: collection services, disposal services and recycling services. The disposal services include transfer stations and landfills.

Covanta Company Profile

Covanta Holding Corporation is a holding company. The Company, through its subsidiaries, owns and operates infrastructure for the conversion of waste to energy, as well as other waste disposal and renewable energy production businesses. The Company operates through North America segment, which consists of waste and energy services operations located primarily in the United States and Canada. Outside of North America, the Company is constructing an energy-from-waste (EfW) facility in Dublin, Ireland. The Company holds interests in an EfW facility in Italy and an infrastructure business in China, which is engaged in EfW operations. These EfW projects generate revenue from three main sources: fees charged for operating projects or processing waste received; the sale of electricity and/or steam, and the sale of ferrous and non-ferrous metals that are recovered from the waste stream as part of the EfW process.

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