Covanta Holding Corporation Stock Upgraded (CVA)

NEW YORK ( TheStreet) -- Covanta Holding Corporation (NYSE: CVA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, expanding profit margins, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • CVA's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • COVANTA HOLDING CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, COVANTA HOLDING CORP increased its bottom line by earning $0.58 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.58).
  • 37.40% is the gross profit margin for COVANTA HOLDING CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.00% trails the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Commercial Services & Supplies industry average, but is less than that of the S&P 500. The net income increased by 13.0% when compared to the same quarter one year prior, going from $23.00 million to $26.00 million.
  • After a year of stock price fluctuations, the net result is that CVA's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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Covanta Holding Corporation, through its subsidiaries, provides waste and energy services to municipal entities primarily in the United States, Canada, Latin America, Europe, and Asia. The company has a P/E ratio of 29.3, above the average materials & construction industry P/E ratio of 9.3 and above the S&P 500 P/E ratio of 17.7. Covanta Holding has a market cap of $1.91 billion and is part of the industrial goods sector and materials & construction industry. Shares are up 21.2% year to date as of the close of trading on Friday.

You can view the full Covanta Holding Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff
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