Trash hauling probably sounds like the last industry you'd consider for growth. But this seemingly dirty business hides amazing, innovative green potential.

My Rising Stars portfolio buy this month is Waste Management (NYSE: WM), a garbage-collecting company working toward a less wasteful future.

The business
Houston, Texas-based Waste Management, founded in 1987, enjoys a nationwide presence in dealing with the things we toss. Besides hauling garbage, it's increasingly working on ways to reuse, recycle -- and make money in the process.

The company describes itself as the leading provider of comprehensive waste management services in North America. It owns and/or operates 271 landfill sites and 294 transfer stations, providing collection, transfer, recycling, and disposal services.

But beyond those businesses, Waste Management also works busily to turn your trash into cold, hard cash. Through its subsidiary Wheelabrator Technologies, Waste Management runs 22 plants that produce renewable energy from waste. And with landfill volumes declining in recent years as more customers compost and recycle their discards, the company's also become a major recycler. Its sales in that area increased $423 million in 2010.

Why I'm buying
In its Form 10-K, Waste Management asserts that "helping our customers achieve their environmental goals will enable us to achieve profitable growth." Clearly, Waste Management recognizes the market need for a greener future, and it's putting exciting plans into place to get us there.

Recent developments in this area make me even more enthusiastic about the company. For example, Waste Management recently celebrated the one-year anniversary of its "circles of sustainability" program in McMinnville, Ore., and Seattle, Wash. Waste Management has been providing enough renewable energy in those communities to power 7,500 homes. Through projects like these, Waste Management shows it can transform "waste streams into value streams."

Waste Management has also made strategic investments in many fascinating start-ups that provide cutting-edge green services. Through stakes in companies like Enerkem, Harvest Power, Peninsula Compost Company, and Garick LLC, Waste Management has increased its presence in organics and food waste recycling, some of which it hopes to use for renewable energy production.

Its strong environmental services helped Waste Management land on Ethisphere's 2011 list of The World's Most Ethical Companies. Not sure why this matters? Check out Ethisphere's graph, which reveals that its World's Most Ethical honorees have widely outperformed the S&P 500 since 2007.

Although Waste Management doesn't look screamingly cheap, I've been watching it since April, and its price has dropped nearly 6% since early May. Waste Management's shares trade at about 18 times earnings, far higher than rival Casella Waste (Nasdaq: CWST), which trades at 4 times earnings, and a tad cheaper than Republic Services (NYSE: RSG), which sports a price-to-earnings ratio just under 20.

Still, Waste Management boasts a dividend yield of 3.7%. Although annual profits have shrunk over the last several years, the company restarted revenue growth 2010 with a 6.1% sales boost, and it's generated more than $1 billion in free cash flow annually for years now.

And now, the risks
Beyond the rivals noted above, Waste Management has plenty of competition, including medical waste collector Stericycle (Nasdaq: SRCL), privately owned Safety-Kleen, and local companies and counties and municipalities that maintain their own garbage operations.

The general economic climate can also hurt Waste Management financially. The worse the economy is, the less people consume -- and throw away. Waste Management also provides services to many financially strapped government agencies and municipalities.  

Waste Management actually capitalized off rising commodity prices for paper fibers, aluminum, and glass through its recycling operations in 2010. However, should prices decline, that section of its business would provide far less of a financial boon.

Furthermore, though Waste Management is working hard to steer its business in cool, green directions, a lot of garbage really is dirty and downright toxic. If something goes wrong, and any of Waste Management's operations causes environmental damage, the company could face major liabilities. Along similar lines, many costly regulations currently confine the waste management industry, and the government could always impose more in the future.

The Foolish bottom line
Consumers increasingly demand ways to waste less and reuse more. Waste Management's desire to help them could expand the company's fortunes and improve the world.  That's why I've given the company a spot in my Rising Stars portfolio, where I pursue positive financial returns and social dividends. By both those criteria, Waste Management looks like a winning investment.

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.