Heritage-Crystal Clean (HCCI), mcap=$836m, price $34.57 vs $28.84

– Processes hazardous and non-hazardous waste (60%, non-cyclical) and re-refines of used oil (40% cyclical).
– Far cheaper than its larger peer $CLH.
– Although the oil business is cyclical and currently over-earning, it has shown a 15-year CAGR of 33%.
– Due to continued high energy prices, elevated earnings might persist for longer than investors expect.
– The appeal of the non-cyclical environmental services business more than off-sets the risks of cyclicality in the oil refining business.
– Potential acquisition target by a larger solid waste company.

– 8x larger peer $CLH trades at 8.5xEBITDA and 18x FCF.
– At the same multiple $HCCI would be $40/share stock.

Exp. gain: +39% to 40/share

Full $HCCI write-up (free guest account required):

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