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The world has a plastic problem, and one Norwegian company is offering a solution.

The world produces 350 million metric tons of plastic each year—about 100 pounds for every man, woman and child on earth each year—and something needs to be done with all the leftovers. That something used to be China, which once took in over 70% of the world’s plastic waste. But China is no longer buying it. Southeast Asian countries are increasingly reluctant to do so, so what should countries do with it?

Enter TOMRA Systems (ticker: TOM.Norway). The Oslo-based company is the largest producer of reverse vending machines and sensor-based machines for sorting and recycling. It has more than 83,000 vending machines and nearly 6,000 of its sorting recycling systems installed in 80 countries world-wide, and could be the beneficiary as the amount of plastic that’s recycled—currently about 14%—continues to grow.

TOMRA clearly benefited from this already, with revenue growth of 40% a year for the last 5 years, half of which comes from sorting systems and the other half from reverse vending machines, which allow users to return empty plastic containers in exchange for funds. And its market capitalization of $39.2 billion makes it the top global player in both sorting and collections solutions, an area where it may be the only large player. “There’s not a number two that’s focused globally on recycling and resource optimization,” says Arun Daniel, senior fund manager at J O Hambro Capital Management.

TOMRA’s valuation reflects that. At 272.20kr a share, it trades at 45 times earnings estimates for the next 12 months. Clearly, investors think TOMRA is going to benefit even more from recycling demand—and they may not be wrong. China’s backing away from the plastic-waste market comes just as regulators are demanding more recycling, forcing countries and companies to find other solutions.

A new market has already opened up in Scotland, where consumers will be charged a 20-pence deposit for plastic bottles. That deposit will be refunded upon return of the empty container, either over the counter or through a reverse vending machine. A number of other EU member states are also expected to come up with similar restrictions on plastic pollution by 2021 after the European Council adopted its directive on single-use plastic products just last week (May 21). Included are plastic- bottle collection targets of 77% by 2025 and 90% by 2029.

“Since we are the biggest player—with 75% market share in the reverse vending industry—whenever there is a movement in legislation, we will see growth,” said Bing Zhao, director of investor relations & strategy at TOMRA.

Money managers also agree. “These guys have a nice path in the next three or five years and some countries are just beginning to scratch the surface on [reverse vending],” says Daniel.

It’s not just legislation that’s giving recycling a boost. Part of the opportunity is from a cultural shift—people are increasingly horrified by images of plastic waste piling up at landfill sites and drifting in the oceans. But the biggest game-changer could be technology that allows discarded plastic to be recycled into higher quality material, and to do it more cheaply.

In the past, the quality of plastic, recycled polypropylene, or PP, has not been able to compete with ‘virgin’ plastics, but it is now coming close. The result? Some of the biggest makers of plastic packaged goods are beginning to make a commitment to use more recycled material, driving up demand.

Last year, Procter & Gamble (PG) began using more recycled plastics in its products and packaging after figuring out a way to remove color contamination and odor from recycled plastics. More recently, a team of researchers created a more recyclable material, dubbed PDK, which can be deconstructed all the way down to the molecular level and scaled with raw materials similar to those needed for existent plastics.

“We see as necessary for all plastics recycling upgrades to the country’s recycling infrastructure such that these resources are effectively recovered and reintegrated into the supply chain,” said Brett Helms, the staff scientist at the Berkeley Lab who led the research.

TOMRA stock may be too rich for our blood, but we wouldn’t bet against its shares just yet.

Write to Sophia Cai at Sophia.Cai@dowjones.com