Covanta (NYSE: CVA) and AES (NYSE:AES) are both oils/energy companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, institutional ownership, dividends, valuation, analyst recommendations, earnings and risk.
Valuation and Earnings
This table compares Covanta and AES’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Covanta||$1.75 billion||1.07||$57.00 million||($0.37)||-38.70|
|AES||$10.53 billion||0.72||-$1.16 billion||$1.08||10.65|
Insider and Institutional Ownership
91.7% of Covanta shares are held by institutional investors. Comparatively, 93.4% of AES shares are held by institutional investors. 11.6% of Covanta shares are held by insiders. Comparatively, 1.2% of AES shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
This is a summary of recent ratings and target prices for Covanta and AES, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Covanta presently has a consensus price target of $17.67, suggesting a potential upside of 23.37%. AES has a consensus price target of $12.70, suggesting a potential upside of 10.43%. Given Covanta’s stronger consensus rating and higher possible upside, research analysts clearly believe Covanta is more favorable than AES.
Covanta pays an annual dividend of $1.00 per share and has a dividend yield of 7.0%. AES pays an annual dividend of $0.52 per share and has a dividend yield of 4.5%. Covanta pays out -270.3% of its earnings in the form of a dividend. AES pays out 48.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AES has raised its dividend for 5 consecutive years. Covanta is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Covanta and AES’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Risk and Volatility
Covanta has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, AES has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.
Covanta beats AES on 9 of the 17 factors compared between the two stocks.
Covanta Company Profile
Covanta Holding Corporation, through its subsidiaries, provides waste and energy services to municipal entities primarily in the United States and Canada. It owns and operates infrastructure for the conversion of waste to energy, as well as engages in related waste transport and disposal, and other renewable energy production businesses. The company disposes waste and generates electricity and/or steam; sells metal recovered during the energy-from-waste (EfW) process; and offers waste management solutions, such as site clean-up, wastewater treatment, transportation and logistics, recycling, and depackaging. It owns and operates 43 EfW facilities; and 5 additional energy generation facilities, including wood biomass and hydroelectric renewable energy production facilities in North America. The company also owns and operates 17 transfer stations, 19 material processing facilities, 1 regional metals recycling facility, and 4 landfills. Covanta Holding Corporation has a strategic partnership with the Green Investment Group Limited to develop, fund, and own EfW projects in Ireland and the United Kingdom. The company was formerly known as Danielson Holding Corporation and changed its name to Covanta Holding Corporation in September 2005. Covanta Holding Corporation was founded in 1960 and is headquartered in Morristown, New Jersey.
AES Company Profile
The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.
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