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Is Waste Management a buy?

It’s time to break down a name that has been gaining traction of late. Here is the break down on $WM, otherwise known as Waste Management.

Current Price: $127.43

52/Wk High: $127.56

52/Wk Low: $85.34

Market Cap: $53.9 Billion

Dividend: $0.575 / 1.84%

Read below for the breakdown!

Waste Management ($WM) is North America’s leading waste management company and not only works with customers to take care of and reduce waste but works to collect valuable resources and create renewable energy.

In recent news, Waste Management closed its $4.6 billion acquisition of Advanced Disposal. The deal will give Waste Management access to over three million new customers across 16 states, making the company only stronger.

In recent weeks, Waste Management has seen strong upside given large inflows into cyclical names, leading the stock on a 13.5% rally in just the last four weeks.

Given the future of renewable energy and the ever growing amount of waste production across the country, investors are left wondering if Waste Management is a buy.

Digging into the numbers Waste Management beat Q4 expectations with an EPS of $1.13, much better than the EPS analysts consensus estimate of $1.09. On a year over year basis, EPS declined -5.04%.

Revenues were solid as well, increasing by $185 million year over year to a strong $4.067 billion for the quarter. As for the full year, FY 2020 revenues totaled $15.218 billion, less than the 2019 level of $15.455 billion.

Shifting into income, management reported an income from operations of $654 million, representing a slight decline from the 2019 Q4 level of $655 million.

Furthermore, operating EBITDA declined throughout the quarter to $1.090 billion from a stronger $1.142 billion in Q4 of 2019. For the full year, operating EBITDA declined as well to $4.105 billion from $4.280 billion.

Taking a look at close look at income, net income for the quarter totaled $438 million, less than the Q4 2019 level of $447 million.

For the full year, net income declined to $1.496 billion from the FY 2019 level of $1.670 billion.

Management was upbeat about the quarter.

“I am extremely proud of how our team worked through the challenges during 2020 to provide reliable, high quality service, and continued to do so as we welcomed new customers and team members following our acquisition of Advanced Disposal,” CEO Jim Fish said.

As for guidance leadership expects revenues to increase within a range of 10.75% to 11.25% throughout FY 2021. Furthermore, FY 2021 adjusted operating EBITDA is expected to land within a range of $4.75 to $4.9 billion.

Shifting into the balance sheet the numbers are solid.

Total Debt: $13.810 Billion

Total Liabilities: $21.893 Billion

Total Assets: $29.345 Billion

Cash & Short Term Inv: $553 Million

On a valuation basis, Waste Management deos trade at a premium.

Price to Earnings: 36.30x

Forward Price to Earnings: 24.40x

Price to Sales: 3.55x

Price to Book: 7.25x

Price to Cash Flow: 15.07x

Management has been effective.

Return on Equity: 20.61%

Return on Assets: 5.24%

Return on Invested Capital: 5.94%

Given the numbers the analysts are bullish with a mean price target of $129.00/share, representing a 1.23% upside.

The high price target is $149.00/share, representing a 16.93% gain, while the low price target is $119.00/share, representing a -6.62% downside.

The big money is quite involved as well with 77.51% of Waste Management being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.

On a technical basis, Waste Management is bullish. According to the six-month charts the MACD is moving to the upside with significant momentum within a range of 2.86 down to 2.27.

The six-month charts are also indicating an RSI of 70.92 and CCI of 130.57, both of which are on the high end.

In short, Waste Management ($WM) is a solid company with consistent earnings numbers and a growing renewable energy industry to expand into.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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