Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
week Covanta, Inc.
announced the pricing of a note offering.The waste disposal and waste-to-energy company raised $400 million in
the deal.The new capital will make it
possible for Covanta to repay some older debt when enough to spare for future
expansion capital.Covanta’s business
model of using the municipal waste it collects for electricity generation is
capital intensive.What is more management
has shown a penchant for acquisitions.Just two months ago Covanta acquired two waste transfer stations from a
appears to be making good on its investments.The company earned $45 million in net income on $2.3 billion in total
sales in the most recently reported twelve months.The company boasts a 2.1% return on assets.That is not quite up to the average of the waste
management industry, but Covanta can be given a bit of consideration.The company converted 19.4% of its sales to
operating cash flow.For a company
perpetually in need of investment capital, strong cash flows are vital.
cash flows are also vital for Covanta’s dividend.The company has raised its payout twice since
initiating the dividend in March 2011.The current yield is 3.7%, putting Covanta among the few small-cap
companies in our Beach Boys Index of biofuel companies to pay a dividend.The stock trades at 36.1 times the 2014 consensus
earnings estimate, making it one of the most expensive as well.
review of recent trading patterns suggests CVA is overbought at the current
price level.The stock has been on the
rise since the beginning of February, largely in response to bullish chatter
encouraged by the note offering.Anyone
considering long positions in CVA might watch for periods of trading weakness
to accumulate shares.
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of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies