Investing in companies providing systems and technologies for wastewater management sure can have its rewards. The clamor of the times is for sustainable use of our planet’s resources, particularly water.
The UN underscored the urgency on this matter when it declared 2005–2015 as “Water for Life” International Decade for Action and subsequently setting 2013 as the milestone for International Year of Water Cooperation. The UN emphasized that “two-thirds of world’s population could be living under water-stressed conditions” by 2025 or just 12 years from now.
Water polluters list revealed
What’s even more disconcerting is that some U.S. government functionalities appear among the culprits in unsustainable water management. Two federal agencies —the U.S. Department of Defense and the U.S. Tennessee Valley Authority—were listed in the top 10 of the Toxic 100 Water Polluters Index released this May by the Political Research Institute (PERI) of the University of Massachusetts, Amherst.
Seven U.S.-owned corporations and Evonik, a privately held foreign-owned company, were also in the top 10 list. The chemical releases and scores in the PERI index were based on the widely used Toxics Release Inventory of the U.S. Environmental Protection Agency.
Three experts in the field
Clean Harbors Inc (NYSE:CLH), is one concern which can help both government entities and private companies improve their water utilization in terms of sustainability. This company has seven wastewater treatment facilities offering a range of technologies to process hazardous and non-hazardous wastes. Filtration and water treatment are also among the field services this company offers.
From its name alone, US Ecology Inc. (NASDAQ:ECOL), also comes as one logical option for equities on wastewater management. This 61-year old company has a six-acre facility in Detroit, MI, which has been serving the US East and Midwest industrial markets for close to 40 years. This facility is not only authorized to treat nonhazardous wastewater regulated under Resource Conservation and Recovery Act. It is also permitted to handle hazardous and nonhazardous materials and solids.
For a stock pick with a wider global footprint, Veolia Environnement SA (ADR) (NYSE:VE) looks a viable alternative. As of 2012, this French company’s activities in the management of water and wastewater services covered 69 countries, generating €12.1 billion or 41% of the €29.4 billion total revenues for the year. Veolia Environnement SA (ADR) (NYSE:VE)’s other business segments include environmental, energy, and transport services.
Financials display
Veolia Environnement SA (ADR) (NYSE:VE) had a weak 2013 first quarter, with its revenue at €5.76 billion compared to the close to €6 billion posted a year ago. Revenue declines of 3.8% and 4.6% were registered in its water and environmental services, respectively. Operating income for the 2013 first quarter slid 4.3% to €290.3 million.
Veolia Environnement SA (ADR) (NYSE:VE)’s water services’ performance in Central and Eastern Europe and in the U.S. remained positive, though. This May, Veolia was also awarded a €130 million contract to build three waste-water treatment plants for the Chilean pulp and paper producer CMPC Group.
US Ecology Inc. (NASDAQ:ECOL) achieved stronger financial results in the 2013 first quarter, with its total revenue up 30% to $42.9 million from $33.0 million a year earlier. Net income for the recent quarter of 2013 rose to $5.4 million, or $0.29 per diluted share, from $4.5 million, or $0.25 per diluted share, in the 2012 first quarter.
This April, the company also paid a $0.18 quarterly cash dividend, a payout US Ecology has continuously implemented since 2005. Its current annual dividend yield is approximately 2.7%.
An acquisition cost burden
Clean Harbors Inc (NYSE:CLH) likewise achieved higher 2013 first quarter revenues, up 51% year over year from $572.0 million to $862.2 million, reflecting the acquisition of used oil re-refiner and recycler Safety-Kleen. The cost of the acquisition coupled with higher depreciation and amortization expense resulted in a decline in operating income to $34.8 million in the 2013 first quarter, from $61.7 million a year earlier. $10.5 million net income, or $0.17 per diluted share, was posted in the most recent quarter compared with the $32.0 million, or $0.60 per diluted share, registered in the 2012 first quarter.
Why Veolia may be a better pick
Bullish sentiments have been expressed onClean Harbors Inc (NYSE:CLH) and US Ecology, as well as on Veolia. More or less, this is an affirmation on the potent growth opportunities on business platforms aligned with sustainable economic development.
As a final take though, Veolia Environnement SA (ADR) (NYSE:VE) looks as a leading choice among the three based on current valuations. Currently moving at a 52-week band of $9.37-14.06, Veolia has an estimated 12.35 P/E ratio, compared to US Ecology Inc. (NASDAQ:ECOL)’s 19.44 and Clean Harbors Inc (NYSE:CLH)’s 30.36. Veolia’s current dividend yield of 7.20% likewise appears superior. Additionally, the upside potential favors Veolia which is trading at 5.25% over its price last year whereas US Ecology is already 65% above its price level last year.
Arturo Cuevas has no position in any stocks mentioned. The Motley Fool recommends Veolia Environnement SA (ADR) (NYSE:VE). The Motley Fool owns shares of Clean Harbors and US Ecology. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Where To Invest as Earth Nears Water Stress originally appeared on Fool.com and is written by Arturo Cuevas.
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