Do Analysts Know Something We Don't About Waste Management (WM)?

Waste Management may be overvalued with mixed growth prospects, but the 16 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $151.0 to $196.0 per share, for an average of $168.31. At today's price of $154.46, Waste Management is trading -8.23% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Waste Management, Inc. is an American waste management, comprehensive waste, and environmental services company in North America. The large-cap Utilities company is based in Houston, TX. Waste Management has offered a 1.81% dividend yield over the last 12 months.

Waste Management has a trailing twelve month P/E ratio of 29.48, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of 6.71, the company has a forward P/E ratio of 23.02. Based on the average annual growth rate of Waste Management's historical and projected earnings per share, which is 9.6%, the company's PEG ratio is 3.07. This suggests that these shares are overvalued.

Furthermore, Waste Management is likely overvalued compared to its book value, since its P/B ratio of 9.75 is higher than the sector average of 1.03. The company's shares are currently trading 280.16% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows and increasing revenues. Furthermore, Waste Management has wide margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $14,912 $14,701 $17,348 $19,294
Revenue Growth n/a -1.41% 18.01% 11.22%
Gross Margins 23.69% 22.75% 23.65% 24.72%
Gross Margins Growth n/a -3.97% 3.96% 4.52%
Operating Margins 18.15% 16.56% 17.09% 17.44%
Operating Margins Growth n/a -8.76% 3.2% 2.05%
Net Margins 11.2% 10.18% 10.47% 11.6%
Net Margins Growth n/a -9.11% 2.85% 10.79%
Earnings Per Share $3.94 $3.54 $4.36 $5.49
EPS Growth n/a -10.15% 23.16% 25.92%
Diluted Shares (MM) 424 423 416 408
Free Cash Flow (MM) $2,056 $1,771 $2,434 $1,949
FCF Growth n/a -13.86% 37.44% -19.93%
Capital Expenditures (MM) $1,818 $1,632 $1,904 $2,587
Net Debt / EBITDA 5.08 5.6 4.88 4.35
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.