I wrote last week that investors should consider cleaning chemicals maker Nalco Holdings (NYSE:NLC) because it was a takeover candidate, and its stock price was low relative to its projected earnings growth.

If you took my advice, congratulations — you just made a 33% return on your investment in just over a week after Ecolab (NYSE: ECL) announced Wednesday that it will acquire Nalco for $5 billion, or $38.80 a share — 33% above its July 11 price of
$29.17.

The reason I noticed Nalco was that a rival of the company had been acquired the day before. Arch Chemicals (NYSE:ARJ) was bought by Swiss specialty chemicals and biotechnology company Lonza for $1.2 billion in cash.

But it turns out that Nalco isn’t the only medium-sized player in the pollution cleanup business.

I’d consider buying shares in Clean Harbors (NYSE: CLH) — it doesn’t make cleanup chemicals, but it does offer environmental
cleanup services. And the beauty of investing in Clean Harbors is that it’s doing quite well without needing to be acquired. The question for investors is whether there is still upside in its stock if it remains independent.

Here are four reasons why there likely is:

• Excellent first-quarter earnings. Clean Harbors reported first-quarter 2011 EPS of 86 cents — 32% above analysts’ estimates. And it raised its 2011 revenue forecast.
• Inexpensive stock. Clean Harbors price-to-earnings-to-growth (PEG) ratio of 0.8 makes it inexpensive (a PEG of 1.0 is considered fairly priced). This is particularly impressive given that it just hit an all-time high of $112. Clean Harbors’ P/E is 21 and its earnings are expected to grow 26% to $4.35 a share in 2012.
• Rapid growth and solid balance sheet. Clean Harbors has grown quickly. Its revenue has increased at an average rate of 19.5% over the last five years and its net income has risen at a 38.2% annual rate over that period. Its cash has risen faster than its debt – cash climbed at a 38% annual rate from $84 million (2006) to $306 million (2010). During that time, its debt rose at 21.8% annual rate from $123 million to $271 million.
• Out-earned its capital cost — at an accelerating rate. Clean Harbors earned more operating profit than its cost of capital, and it’s gaining ground fast. The company’s EVA momentum, which measures the change in “economic value added” (essentially, profit after deducting capital costs) divided by sales was 8%, based on 2009 revenue of $1 billion, and EVA that rose from negative $73 million in 2009 to $16 million in 2010, using a 10% weighted average cost of capital.

Clean Harbors could be an attractive acquisition candidate for a company interested in environmental cleanup. If not, its stock seems to be doing quite nicely on its own.

Peter Cohan has no financial interest in the securities mentioned.