Critical Analysis: Covanta (CVA) & Its Competitors

Covanta (NYSE: CVA) is one of 20 public companies in the “Waste Management, Disposal & Recycling Services” industry, but how does it contrast to its competitors? We will compare Covanta to related businesses based on the strength of its risk, dividends, earnings, profitability, institutional ownership, valuation and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Covanta and its competitors, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Covanta 1 0 6 0 2.71
Covanta Competitors 46 280 586 14 2.61

Covanta presently has a consensus price target of $17.79, suggesting a potential upside of 20.58%. As a group, “Waste Management, Disposal & Recycling Services” companies have a potential upside of 9.42%. Given Covanta’s stronger consensus rating and higher possible upside, analysts plainly believe Covanta is more favorable than its competitors.

Profitability

This table compares Covanta and its competitors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Covanta -3.68% -12.66% -1.11%
Covanta Competitors -280.96% -68.14% -14.45%

Institutional & Insider Ownership

94.8% of Covanta shares are owned by institutional investors. Comparatively, 53.0% of shares of all “Waste Management, Disposal & Recycling Services” companies are owned by institutional investors. 11.6% of Covanta shares are owned by company insiders. Comparatively, 12.3% of shares of all “Waste Management, Disposal & Recycling Services” companies are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Covanta and its competitors gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Covanta $1.70 billion -$4.00 million -29.50
Covanta Competitors $850.65 million $28.19 million 150.40

Covanta has higher revenue, but lower earnings than its competitors. Covanta is trading at a lower price-to-earnings ratio than its competitors, indicating that it is currently more affordable than other companies in its industry.

Volatility and Risk

Covanta has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500. Comparatively, Covanta’s competitors have a beta of 0.62, meaning that their average stock price is 38% less volatile than the S&P 500.

Dividends

Covanta pays an annual dividend of $1.00 per share and has a dividend yield of 6.8%. Covanta pays out -200.0% of its earnings in the form of a dividend. As a group, “Waste Management, Disposal & Recycling Services” companies pay a dividend yield of 1.9% and pay out 98.2% of their earnings in the form of a dividend. Covanta is clearly a better dividend stock than its competitors, given its higher yield and lower payout ratio.

Summary

Covanta beats its competitors on 11 of the 14 factors compared.

About Covanta

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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