NEW YORK (TheStreet) -- Handling hazardous waste is a dangerous industry. And holding shares in Clean Harbors (CLH - Get Report) , a company that disposes hazardous waste material, has proven equally dangerous for investors.
With the company due to report fourth-quarter earnings before the bell Wednesday, investors would be wise to take profits now, especially with the stock up more than 9% on the year.
Seeing their shares in positive territory is not something familiar to Clean Harbors investors. The stock, which is down 20% in the past three years, has been a surprise in 2015. But it can't last. And investors would do well to just move on while they're ahead.
CLH 6 Month Price Returns (Daily) data by YCharts
For starters, Clean Harbors does not have a solid history of execution. The company missed earnings estates by almost 30% in the third quarter, with earnings excluding items of 45 cents a share versus analysts' estimates of 63 cents.
Secondly, with year-to-date earnings down 26%, analysts are growing more bearish about the company's prospects. Not only have earnings estimates for Wednesday's results been reduced by 3% to 32 cents per share, analysts have also cut estimates for the March quarter and full-year by 14% and 1.4%, respectively. This is not a good sign for a stock that's already expensive.
At $52.34 per share, Clean Harbors is trading at 29 times forward earnings of $1.81 per share. That forward price-to-earnings ratio is 12 times higher than the average forward estimates of companies in the S&P 500 index. And assuming the company does meet its full-year 2014 earnings estimate of $1.40 per share, this puts its trailing P/E at 37, which almost doubles the average trailing P/E of S&P 500 companies.
Last but not least, investors must reconcile how the company, whose earnings declined 34% last year, is going to meet the earnings growth implied in its valuation? Analysts are modeling for annual earnings growth of 1.25% in the next five year. At that rate, it would take two decades for its trailing P/E to make sense with the rest of S&P stocks. In other words, there is no value here.
For the quarter ended in December, analysts will be looking for earnings of 32 cents per share on revenue of $835.96 million, representing year-over-year declines of 27% and 5%, respectively. For the full year, earnings are expected to decline 26% year over year to $1.40 per share, while revenue is projected to be $3.4 billion, down 3%.
What stands out here, earnings are declining at almost eight times faster than revenue. Smart investors should see this and not waste another second holding this stock.
TheStreet Ratings team rates CLEAN HARBORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CLEAN HARBORS INC (CLH) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
You can view the full analysis from the report here: CLH Ratings Report