The firm said it lowered its rating on the company, which owns and operates infrastructures for the conversion of waste to energy, as it believes valuation has been fully realized after 37% year to date gains.
"We believe Covanta can grow free cash flow through 2018 with a full year of the Dublin, Ireland project where we estimate a full year adds $73 million in EBITDA and $30 million in free cash flow," Barclays said.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
Barclays has a $24 price target on Covanta stock.
Shares of Covanta are lower by 1.03% to $24.11 at the start of trading this morning.
Separately, TheStreet Ratings team rates COVANTA HOLDING CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate COVANTA HOLDING CORP (CVA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, CVA's share price has jumped by 43.83%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- 35.51% is the gross profit margin for COVANTA HOLDING CORP which we consider to be strong. Regardless of CVA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.44% trails the industry average.
- COVANTA HOLDING CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, COVANTA HOLDING CORP reported lower earnings of $0.35 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus $0.35).
- CVA, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: CVA Ratings Report