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Clean Harbors Needs Another Disaster

Stocks in this article: CLHBPWMVE

I want to clear something up, though. While I have cited these two examples of how Clean Harbors has benefited from horrific events, I don't want to paint the company as some blood-hungry hound that seeks to profit off the hardships of others. Neither Sandy nor BP's oil spill was the fault of Clean Harbors. I want to be careful in making this known. And I don't believe that anyone associated with Clean Harbors is happy about any personal damage that the company has been called upon to clean.

However, as they say, "It's a tough job, but somebody's got to do it." And as with rivals like Waste Management (WM) and Veolia Environnement (VE), much of Clean Harbors' revenue is predicated on cleaning up other people's messes. Unfortunately, though, there hasn't been another mess to clean up since Sandy. And investors have become "lukewarm" about Clean Harbors' stock. Although shares have posted gains of 4% on the year to date, the stock is down close to 6% over the past four months.

By contrast, during that same span, shares of Waste Management are up close to 30%, while Veolia stock is up 20%. I believe the reason for the "indifference" in the stock has much to do with Clean Harbors' $1.25 all-cash deal to buy rival Safety-Kleen, which was announced (interestingly) when the markets closed due to Sandy's destruction in New York.

I'm not suggesting that investors are angry at the deal. But it seems the Street is waiting to see what sort of value comes out of this union. On Wednesday, the company will report second quarter results, which should shed more light on the company's direction, while giving investors a fresh glimpse on what Clean Harbors can truly become.

I like the company's prospect a lot better with Safety-Kleen than I did prior to the deal. But it's going to take some time for management to "clean up" the synergistic advantages and reduce the overlap created by the acquisition. In the meantime, given that Clean Harbors is already trades at a price-to-earnings ratio of 29, which is more than twice that of Veolia and 6 points higher than Waste Management, I wouldn't rush to jump into the stock here. This is unless of course a disaster breaks.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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