Green Or Mean Returns - Investing In The Environment
By Freddie Mooche, Fri Dec 9th

Every industry is affected by rules and regulations.Environmental issues are becoming of greater importance as moreand more regulations go into affect. Cleaner air, water,pesticides even the garbage we throw away is regulated. Do youthink much about it?

Even the oceans are cause for environmental regulation. Theresent oil tanker that broke in two off the coast of Spain hasbecome world news and threatens the ocean's eco system and theindustries that rely on it. From an investment perspective itsthe fishing industry's concern, as losses can run into themulti-millions. But fishermen aren't the only one's who'llsuffer.

In 2015 all oil transport ships are to be double hulled. That'sthe current regulations and they're already talking aboutreforming that act. That spill is going to force thoseregulations to be changed, and rapidly. What that means is moreships will have to be built sooner. But it will also increasethe cost of transporting oil in the short term and that meansYOU are going to pay more for heating oil and gas for your car.

That brings me to the point of this article. The environment canprovide green investments or mean investments, depending onwhich end of the spectrum your on.

The fishing industry off the coast of Spain is going to suffer,ship builders are going to benefit, the transportation industryis going to suffer and then the micro economic effects begin to(pardon my pun) spill over to smaller businesses.

Investing in environmental companies that are charged with cleanup is a pretty safe bet. But only those that are consistentlyinvolved are the safest investment and have the greatest chancefor growth; better green than mean. Go for safe, consistentsegments.

What do we mean by a safe investment? In the environmentalindustry there are certain sectors where demand for theirservices are growing, especially since regulations began to beenacted to deal with the mounting waste issues. Two of thesafest areas we've found are in the recycling field. Automotivebyproducts, tires, are one of the more consistent demands inrecycling. It's a green investment! The other is toxic metalsand water. Very consistent demand, another green investment!

Axcess Business News looked at two green investments in therecycling industry, Greenman Technologies, Inc. and KBFPollution Management, Inc. We recently interviewed the CFO ofGreenman Technologies, Inc. (AMEX: GRN) in Axcess Business NewsInside Wall Street column and had selected it as one of our"best picks" in our Stock Guide. The other company, KBFPollution Management, Inc. (OTCBB: KBFP) is also in our SmallCap Corner's "best picks" column. GRN recycles tires and KBFPcleans up toxic metals and waste water. Two environmentalcompanies in the recycling sector, both with consistent demandfor their services. Green investments!

GRN and KBFP By The Numbers

Greenman Technologies, Inc. Classification: business services.In the first row are the Industry Averages and in the second roware Greenman Technologies, Inc. numbers. Source: Market Guide asof 11/17/02

Mkt. Cap P/E Profit (%) Margin Price to Sales ROE Sales perShare Debt to Equity EPS Growth (5 yr.) 404.71 33.60 9.49% 6.7315.48 NA 0.24 17.67 30.82 21.51 4.97% 1.09 93.04 1.84 2.35 NM

KBF Management , Inc. Classification: waste managementservices. In the first row are the Industry Averages and in thesecond row are KBF Management, Inc. numbers. Source:Market Guide as of 11/17/02

Mkt. Cap P/E Profit (%) Margin Price to Sales ROE Sales perShare Debt to Equity EPS Growth (5 yr.) 408.31 77.94 2.78% 1.385.19

NA 1.76 25.93 10.17 NM -25.01% 1.79 -24.33 0.04 0.49 NM

Below is a 3-month chart of Greenman Technologies Inc (AMEX:GRN) compared to KBF management, Inc. (OTCBB: KBFP)and the Index (POL).

Looking for the Green

First of all, "classifications" can be confusing. GRN isclassified as "business services", yet their S&P Company Reportclassifies them as "capital goods: environmental services" andKBFP is classified as "waste management services".

Trusting the numbers is another issue. Market Guide portrays theinformation to be current, yet based on their recentannouncements of sales and earnings for the 3rd quarter endingSept 30, neither GRN or KBFP's is exact. Data often isn'tenough, you have to look deeper to find the green.

Clearly both companies are undervalued. Their industryclassifications show very high P/E ratios. Makes you think yourlooking at Microsoft's numbers about 10 years ago. GRN isoutperforming its industry average and based on those averages,if it traded equal to its peer group the stock should be pricedaround $3.50 not $2.00 where it currently trades. KBFP on theother hand has an even higher P/E ratio for its industryclassification; Market Guide's figures appear to be wrong. KBFPannounced on 11/14/02 that its sales had increased 50% for thequarter in comparison to the same period in the prior year andits earnings were reported to be $273,508 for the period endingcompared to $109,700 for the previous year! So based on thatrecent announcement, KBFP is also undervalued. If it tradedequal to its peer group the stock should be priced around $0.10not $0.06 where it currently trades.

Let's examine why Axcess Business News believes these are safeinvestments. The five year earnings per share growth estimatesfor GRN's industry classification is 17.67%. Is your saggingportfolio of Telco stocks giving you that? I don't think so! GRNhas debt, yet they've been very aggressive in expanding throughacquisition and only recently listed to the AMEX from the OTCBBin September. KBFP's industry classification (5yr earnings pershare growth estimates) is 25.93%. We like those kinds ofnumbers even better.

Both of these green investment companies have been aggressiveand showing stellar improvements in their sales and earnings.They both have a lot of debt. But they both have a consistentmarket and most likely Market Guide's 5-year industry averagesare close to reality. Give those 5yr averages a 50% haircut andyou've still got a good return. Better than the DJIA, certainlybetter than money markets or certificates of deposit and there'sroom for appreciation as both companies are trading about 50%lower than their industry average.

Axcess Business News thinks that KBFP may be on the same path asGRN. They too are postured for growth and if they begin to goafter acquisitions and list up to AMEX (remember, GRN was on theOTCBB) it could easily catch up to its peer group. GRN on theother hand has a head start and based on its prior growthinvestors may see more acquisitions happening.

Axcess Business News will continue to report on the activitiesof these companies for our readers as it's sure to interestinvestors. Members should watch for an Axcess News Alert intheir in-box! If your not a member, consider subscribing now andyou can get these great market alerts too!

To view more wall street stories by Freddie Mooche, go tohttp://wwwtheaxcess.net and subscribe. Its free!

About the author:Ms. Mooche is the senior financial columnist for Axcess BusinessNews. She was Senior Analyst with Axiom Capital Corportion priorto becoming a Wall Street columnist and financial journalist.Her columns include, Inside Wall Street and Axcessing TheAnalysts.