Reviewing Advanced Disposal Services (ADSW) and Covanta (CVA)

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

Institutional & Insider Ownership

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

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%

Analyst Ratings

This is a summary of recent ratings 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 target price of $26.00, suggesting a potential upside of 7.57%. Covanta has a consensus target price of $18.14, suggesting a potential upside of 7.04%. Given Advanced Disposal Services’ higher possible upside, analysts clearly believe Advanced Disposal Services is more favorable than Covanta.

Earnings & Valuation

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

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.

About Advanced Disposal Services

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.

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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