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5 Reasons Why Waste Management Stock is a Solid Pick Now
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The U.S. presidential election is likely to have a positive impact on the waste management industry. Trump's policies might have an extensive impact in the industry, as increasingly rigid regulations will act as a barrier for new companies to enter this space. Waste Management Inc. (WM - Free Report) could be one such stock that benefit from the impending changes.
Headquartered in Houston, TX, Waste Management is the largest provider of comprehensive waste management services in North America. The company provides collection, transfer, recycling and resource recovery, as well as disposal services to nearly 20 million residential, commercial, industrial and municipal customers. It is also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the U.S.
Earnings Growth
Nothing is more important than earnings growth as surging profit levels is what most investors are after. Earnings growth in the double digits is definitely necessary and it is often an indication of strong prospects (and stock price gains) for the company.
Waste Management is looking to grow at a rate of 11.4%, thoroughly crushing the industry average, which expects earnings per share growth of just 4.9%.
Sales/Assets Ratio
The sales/asset ratio is often overlooked by investors, but it can be an important indicator in growth investing nonetheless. This metric — also known as S/TA — shows us how much sales are generated from the company’s assets, indicating whether a firm is using its assets effectively.
Currently the company has a S/TA ratio of 0.65 which means that it gets 65 cents in sales for each dollar in assets (1.25 for the ratio = $1.25 in sales for each dollar in assets, 0.5 for the ratio = 50 cents in sales for each dollar in assets). Comparing this to the industry average ratio of 0.61 we can say that Waste Management is a bit more efficient than the industry at large. The company currently projects sales growth this year of 4.48%, ahead of the industry average of 0.00%.
Return on Equity
One of the most important profitability metrics is Return on Equity (ROE). ROE reveals the amount of profit a company earned compared to the total amount of shareholder equity found on the balance sheet. Waste Management currently has a ROE of 21.71%, whereas the industry’s ROE is 8.55%. The favorable ROE acts as growth driver for the company.
Earnings Estimate Revisions
In addition to the favorable metrics outlined above, investors should also consider the positive trends that we are seeing on the analyst estimates revision front. Analysts have been raising their estimates for Waste Management lately, and now the earnings picture is looking favorable for the company.
The company outperformed the Zacks categorized Waste Removal Services industry with an average return of 13.2% compared with 6.4% for the latter, over the last 3 months. Over the past 90 days, consensus estimate for the full year has jumped from $2.85 to $2.91 per share today. Also, the current-quarter estimates have risen from 75 cents to 77 cents per share, over the same time period.
Strategic Divestitures
The company has also taken steps to divest non-core operations and enhance focus on high-growth potential areas that will generate higher cash flows and spur the top line. Some time back, it inked an agreement to sell its Wheelabrator waste energy business to Energy Capital Partners for $1.94 billion. The proceeds from this divestiture will be utilized for lucrative acquisitions in its core businesses, which are likely to be accretive in order to create long-term shareholder value. Additionally, Waste Management expects yield momentum to continue in the company’s solid waste lines of business in the forthcoming quarters.
Bottom Line
In aggregate, Waste Management currently has a Zacks VGM Score of ‘B’. This, along with some other key metrics, makes the company a solid choice for investors.
Waste Management currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other favorably placed stocks in the industry include Advanced Disposal Services, Inc. , WageWorks, Inc. and Verisk Analytics, Inc. (VRSK - Free Report) . Advanced Disposal Services and Verisk both carry the same Zacks Rank as Waste Management, whereas WageWorks sports a Zacks Rank #1 (Strong Buy) . You can see the complete list of today’s Zacks #1 Rank stocks here.
Advanced Disposal Services has beaten estimates significantly once over the trailing four quarters, for an average positive earnings surprise of 50%.
Verisk has a long-term earnings growth expectation of 11.6% and is currently trading at a forward P/E of 26.3x.
WageWorks has a long-term earnings growth expectation of 15.0% and is currently trading at a forward P/E of 80.6x.
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5 Reasons Why Waste Management Stock is a Solid Pick Now
The U.S. presidential election is likely to have a positive impact on the waste management industry. Trump's policies might have an extensive impact in the industry, as increasingly rigid regulations will act as a barrier for new companies to enter this space. Waste Management Inc. (WM - Free Report) could be one such stock that benefit from the impending changes.
Headquartered in Houston, TX, Waste Management is the largest provider of comprehensive waste management services in North America. The company provides collection, transfer, recycling and resource recovery, as well as disposal services to nearly 20 million residential, commercial, industrial and municipal customers. It is also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the U.S.
Earnings Growth
Nothing is more important than earnings growth as surging profit levels is what most investors are after. Earnings growth in the double digits is definitely necessary and it is often an indication of strong prospects (and stock price gains) for the company.
Waste Management is looking to grow at a rate of 11.4%, thoroughly crushing the industry average, which expects earnings per share growth of just 4.9%.
Sales/Assets Ratio
The sales/asset ratio is often overlooked by investors, but it can be an important indicator in growth investing nonetheless. This metric — also known as S/TA — shows us how much sales are generated from the company’s assets, indicating whether a firm is using its assets effectively.
Currently the company has a S/TA ratio of 0.65 which means that it gets 65 cents in sales for each dollar in assets (1.25 for the ratio = $1.25 in sales for each dollar in assets, 0.5 for the ratio = 50 cents in sales for each dollar in assets). Comparing this to the industry average ratio of 0.61 we can say that Waste Management is a bit more efficient than the industry at large. The company currently projects sales growth this year of 4.48%, ahead of the industry average of 0.00%.
Return on Equity
One of the most important profitability metrics is Return on Equity (ROE). ROE reveals the amount of profit a company earned compared to the total amount of shareholder equity found on the balance sheet. Waste Management currently has a ROE of 21.71%, whereas the industry’s ROE is 8.55%. The favorable ROE acts as growth driver for the company.
Earnings Estimate Revisions
In addition to the favorable metrics outlined above, investors should also consider the positive trends that we are seeing on the analyst estimates revision front. Analysts have been raising their estimates for Waste Management lately, and now the earnings picture is looking favorable for the company.
The company outperformed the Zacks categorized Waste Removal Services industry with an average return of 13.2% compared with 6.4% for the latter, over the last 3 months. Over the past 90 days, consensus estimate for the full year has jumped from $2.85 to $2.91 per share today. Also, the current-quarter estimates have risen from 75 cents to 77 cents per share, over the same time period.
Strategic Divestitures
The company has also taken steps to divest non-core operations and enhance focus on high-growth potential areas that will generate higher cash flows and spur the top line. Some time back, it inked an agreement to sell its Wheelabrator waste energy business to Energy Capital Partners for $1.94 billion. The proceeds from this divestiture will be utilized for lucrative acquisitions in its core businesses, which are likely to be accretive in order to create long-term shareholder value. Additionally, Waste Management expects yield momentum to continue in the company’s solid waste lines of business in the forthcoming quarters.
Bottom Line
In aggregate, Waste Management currently has a Zacks VGM Score of ‘B’. This, along with some other key metrics, makes the company a solid choice for investors.
Waste Management currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other favorably placed stocks in the industry include Advanced Disposal Services, Inc. , WageWorks, Inc. and Verisk Analytics, Inc. (VRSK - Free Report) . Advanced Disposal Services and Verisk both carry the same Zacks Rank as Waste Management, whereas WageWorks sports a Zacks Rank #1 (Strong Buy) . You can see the complete list of today’s Zacks #1 Rank stocks here.
Advanced Disposal Services has beaten estimates significantly once over the trailing four quarters, for an average positive earnings surprise of 50%.
Verisk has a long-term earnings growth expectation of 11.6% and is currently trading at a forward P/E of 26.3x.
WageWorks has a long-term earnings growth expectation of 15.0% and is currently trading at a forward P/E of 80.6x.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>