American Ecology Corp. (Nasdaq:ECOL)
Boise, Idaho
http://www.americanecology.com/

52-week low / high: $18.51 / $26.84
Shares Outstanding: 18.25 million
Market Capitalization: $464 million

Hazardous material might be beneficial for your portfolio. Companies are now mandated by the government — through laws such as the Solid Waste Disposal Act and the Resource Conservation and Recovery Act and the Comprehensive Environmental Response — to dispose of industrial waste and other materials through safe methods. Just how do companies get rid of hazardous waste and comply with federal regulations? Enter American Ecology Corp. (Nasdaq:ECOL), the oldest continuously operating American company that handles, stores, treats and disposes of hazardous and radioactive waste.

Through its U.S. Ecology subsidiary, American Ecology has helped keep a lid on nuclear waste since 1952 and hazardous waste management services since 1968. The Boise, Idaho-based firm handles waste through its facilities in Texas, Nevada, Washington and Idaho.

American Ecology’s customers include some big names. In 2006, Honeywell International Inc. (NYSE:HON) accounted for 38 % of sales and the U.S. Army Corps of Engineers counted for 27%. Other customers include academic institutions, medical facilities, nuclear power plants and steel mills. Along with regular customers, some of its sales are made through large one-time cleaning jobs that can cause unexpected jumps in quarterly revenue. Clean-up projects can last from one week to multiple years.

In 2007, American Ecology’s revenue totaled $165.5 million, up 42% from $116.8 million in 2006 and up 108% from $79.4 million in 2005. Net income during 2007 totaled $19.4 million, or $1.06 per share, compared with $15.9 million, or $0.88 per share, a year earlier.

In terms of Wall Street analyst coverage, February was a positive month for American ecology. During the shortest month of the year, analyst Debra Fiakas of Crystal Equity Research reiterated her "buy" rating on American Ecology, but boosted her price target to $27.25 from $25. On Feb. 8, RBC Capital Markets analyst Jamie Sullivan maintained his "outperform" rating on American Ecology, while raising his price target to $26 from $25. Also on Feb. 8, Sanders Morris Harris analysts reiterated their “buy” rating on American Ecology and raised their price target to $28.50 from $26.50. Likewise on Feb. 8, Wedbush Morgan analysts reiterated their “hold” rating on American Ecology, but raised their price target to $22 from $21.

Even with all the glowing Wall Street coverage, significant risks exist for the firm. A large portion of American Ecology’s business depends upon non-recurring event clean-up projects over which the company has no control. In a regulatory filing, the company said its market is “highly competitive” and faces competition from firms “with much greater resources, service offerings we do not provide and potentially lower pricing.” Some of the firms American Ecology competes with include Waste Management, Inc. (NYSE:WMI), which has a market cap of $16.8 billion, and Clean Harbors, Inc. (Nasdaq:CLHB), with a market cap of $1.3 billion.

Despite the overall market turmoil, shares of American Ecology are up more than 5% in 2008 and more than 30% from the year-ago period. With major indices down during 2008, American Ecology’s stock price movement suggests recession resistance.

Note: American Ecology Corp. (Nasdaq:ECOL) is on the "Watch List" of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, American Ecology displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.