Valuation Scorecard: Stock Rating C-Low Neutral (2/26/24)-Clean Harbors Inc (CLH).

Clean Harbors’ common shares will need to reach $304 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $358 Clean Harbors stock price by 2028. What is the market’s view of Clean Harbors’ future operating performance as reflected in the current price of $181?

Executive Summary

• Clean Harbors’ important characteristics: very high profitability, high expected growth, high financial strength, and instability. A big positive influence on Clean Harbors’ valuation is its superior Growth.
• Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Clean Harbors Peer Group. Recent market returns have outperformed the Clean Harbors Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Clean Harbors shares should reach a level of $401 by 2028 — an 14.1% per year total shareholder return. A 2028 stock price of $304 would reflect median performance and a price of $358 would be required to reach upper quartile performance.
• Growth has been Clean Harbors’ biggest valuation strength. Historical growth has been very high relative to the Clean Harbors Peer Group and forecasted growth is relatively very high. Equity Growth, Revenue Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of Clean Harbors. Clean Harbors’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Clean Harbors’ consensus growth expectations are in line with past growth.
• Return on Equity, Pretax Margin, and Pretax ROA are group leading. These factors have strengthened market perceptions of Clean Harbors. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Clean Harbors’ risk profile is very favorable. Overall variability has been only average with only average revenue variability, only average E.P.S. variability, and above average stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively high. The debt/capital ratio has been relatively steady.

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