The Cleanaway Waste Management Ltd (ASX: CWY) share price has been put in the bin by investors. Cleanaway shares hit a new all-time high of $2.52 just over two months ago, but the Cleanaway share price is sitting at $1.96 at the time of writing – meaning the company has fallen 23.8% from its high in just eight weeks.
Is this a good opportunity to pick up some CWY shares out of the trash can? Or is this company offering investors nothing but rubbish at current prices? (no more puns, I promise).
Who is Cleanaway?
Cleanaway is the largest waste processing company on the ASX (or otherwise) with a market capitalisation of just under $4 billion with around 5,500 employees. Cleanaway manages hazardous waste, wastewater, landfills, and medical waste amongst other services, but its largest operations involve both household and commercial general waste and recycling, servicing around 88 local government areas.
Why have Cleanaway shares been plummeting?
Well, it all started when Cleanaway released its earnings report for the 2019 financial year on August 15. Despite the company posting revenue increases of 33%, earnings increasing by 36% and profits rising by 43%, CWY shares tanked by 14% afterwards. Cleanaway had been trading for quite the premium before the report at a share price that was around 40x earnings, so in this instance, it's clear investors got a bit carried away at what they could expect from this company, and gave it a valuation cut as a result.
Is the Cleanaway share price a buy today?
At today's share price, Cleanaway shares are still going for over 32x earnings, which is still well above the market average of 17. Saying this, Cleanaway is a high-growth company in a highly defensive industry (we all need to get rid of waste, regardless of the economic climate), so there is a lot to like here too. With the Chinese ban on foreign waste and a growing focus on plastic reuse and recycling in Australia, I think this is a great company to keep an eye on! Cleanaway's share price is still a little high for me personally, but it's one on my watchlist and I will be seriously considering a position if the shares fall any further.
