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Bear Of The Day: Casella Waste Systems

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Casella Waste Systems (CWST - Free Report) recently met the Zacks Consensus Estimate and had slightly better than expected revenues in the quarter.  The report also came with guidance that was below the estimate for the topline in 2020.  That has a way of making analysts bring down their numbers and that is why this stock is a Zacks Rank #5 (Strong Sell) and the Bear of the Day.

Description

Casella Waste Systems operates as a vertically integrated solid waste services company in the northeastern United States. As of January 31, 2019, it owned and/or operated 37 solid waste collection operations, 49 transfer stations, 18 recycling facilities, 8 Subtitle D landfills, 4 landfill gas-to-energy facilities, and 1 landfill permitted to accept construction and demolition materials. Casella Waste Systems, Inc. was founded in 1975 and is headquartered in Rutland, Vermont.

Recent Report

The company reported EPS of $0.21 and met the Zacks Consensus Estimate.  Revenues came in at $193.6M just barely above the Wall Street Estimate of $193.3M.

The company issued guidance that was below the Wall Street estimate for the topline in 2020. CWST expects to see revenues of $800M to $815M but the consensus was looking for $815.95M.

Estimate Revisions

The earnings estimates for CWST are coming in.  I see a 1 penny move lower for the current quarter and a 3 cent dip for next quarter.

The full year numbers are more heavily weighted for the Zacks Rank, and they too are moving lower.  Following the recent earnings report, estimates slid from $1.01 to $0.93 for 2020.  Next year saw a far less dramtaic move lower, but still moved lower by about 3 cents.

Valuation

The valuation for CWST is pretty rich.  I see 57x forward earnings, which nearly 3x the market multiple.  Topline growth of 10% seems rather small for such a big multiple.  The price to book of 20x is also very high.  I do see a 3.4x sales multiple which is good for the shareholder as the market is reward each incremental dollar in revenue at a healthy clip.  Finally, I see margins moving higher and all investor love to see that.

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