What Our Analysts Know About Waste Management

Waste Management logged a -0.8% change during today's evening session, and is now trading at a price of $162.51 per share.

Over the last year, Waste Management logged a 1.0% change, with its stock price reaching a high of $175.98 and a low of $148.31. Over the same period, the stock underperformed the S&P 500 index by -12.0%. As of April 2023, the company's 50-day average price was $166.21. Waste Management, Inc., through its subsidiaries, engages in the provision of environmental solutions to residential, commercial, industrial, and municipal customers in the United States and Canada. Based in Houston, TX, the large-cap Utilities company has 49,500 full time employees. Waste Management has not offered a dividend during the last year.

Exceptional Profitability Overshadowed by Excessive Leverage:

2020-02-13 2021-02-22 2022-02-15 2023-02-07
Revenue (MM) $15,455 $15,218 $17,931 $19,698
Gross Margins 38.6% 38.6% 38.0% 37.6%
Operating Margins 17.8% 16.3% 16.5% 17.4%
Net Margins 10.81% 9.83% 10.13% 11.36%
Net Income (MM) $1,670 $1,496 $1,816 $2,238
Net Interest Expense (MM) -$411 -$425 -$365 -$378
Depreciation & Amort. (MM) -$1,574 -$1,671 -$1,999 -$2,038
Earnings Per Share $3.91 $3.52 $4.3 $5.56
EPS Growth n/a -9.97% 22.16% 29.3%
Diluted Shares (MM) 428 425 422 407
Free Cash Flow (MM) $5,692 $5,035 $6,242 $7,123
Capital Expenditures (MM) -$1,818 -$1,632 -$1,904 -$2,587
Net Current Assets (MM) -$14,464 -$18,351 -$18,902 -$20,952
Current Ratio 1.97 1.0 0.75 0.81
Long Term Debt (MM) $13,280 $13,259 $12,697 $14,570
Net Debt / EBITDA 3.09 4.15 3.64 3.68

Waste Management benefits from growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and a steady stream of strong cash flows. The company's financial statements show wider gross margins than its peer group and positive EPS growth. However, the firm has a highly leveraged balance sheet.

The Market May Be Overvaluing Waste Management's Earnings and Assets:

Waste Management has a trailing twelve month P/E ratio of 29.9, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of $6.67, the company has a forward P/E ratio of 24.9. Waste Management's PEG ratio is 3.39 on the basis of the 8.8% weighted average of the company and the broader market's EPS compound average growth rates. This suggests that the company's shares are overvalued. Furthermore, Waste Management is likely overvalued compared to the book value of its equity, since its P/B ratio of 9.68 is higher than the sector average of 1.03. The company's shares are currently trading 302.3% above their Graham number.

Waste Management Has an Analyst Consensus of Some Upside Potential:

The 19 analysts following Waste Management have set target prices ranging from $160.0 to $202.0 per share, for an average of $178.92 with a buy rating. As of April 2023, the company is trading -7.1% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Waste Management has a very low short interest because 1.2% of the company's shares are sold short. Institutions own 84.2% of the company's shares, and the insider ownership rate stands at 0.19%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $6,089,437,355.

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.