A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we discuss about Waste Connections Inc. (WCN - Free Report) , a company that has an expected long-term earnings per share growth rate of 11.7%. Moreover, its earnings are expected to register 15.7% growth in 2018 and 13% in 2019.
So far this year, shares of Waste Connections have gained 10.2%, outperforming the 3.9% rise of the industry it belongs to.
Let’s find out what’s driving the stock and why investors should retain it in their portfolio.
Acquisitions Contributing to Top Line
Waste Connections’ top line continues to grow with the help of acquisitions. In the first half of 2018, Waste Connections witnessed annualized revenues of approximately $175 million from acquisitions. Acquisitions contributed almost $1.05 billion of revenues in 2017 and $1.27 billion in 2016.
The company follows a combination of financial, market and management criteria to evaluate opportunities from acquisitions. It is highly optimistic about “tuck-in” acquisition opportunities within its current and targeted market areas as these can help increase market share.
Waste Connections focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place decision-making authority close to the customer.
This enables the company to identify and address customers’ needs on a real-time basis and in a cost-effective manner. This low-overhead, highly-efficient operational structure allows it to expand into geographically contiguous markets and operate in relatively small communities that its competitors may find unattractive.
We appreciate Waste Connections’ endeavors to reward its shareholders in the form of dividend payments and share repurchases. In the first half of 2018, Waste Connections paid $73.6 million of dividend and repurchased shares worth $42 million. In 2017, 2016 and 2015, the company returned $131.9 million, $92.5 million and $65.9 million to its shareholders, respectively, through dividend payment.
In 2017 and 2016, the company did not make any repurchases. In 2015, it repurchased shares worth $91.2 million. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business.
Despite significant growth prospects, the company remains susceptible to seasonality and foreign currency exchange rate fluctuations. A debt laden balance sheet may limit its future expansion and worsen its risk profile. However, we believe that operational efficiency and strategic multiple acquisitions bode well for Waste Connections.
Zacks Rank & Stocks to Consider
Currently, Waste Connections carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Business Services sector include Core-Mark Holding Company (CORE - Free Report) , ICF International (ICFI - Free Report) and Paychex (PAYX - Free Report) . While Core-Mark sports a Zacks Rank #1, ICF International and Paychex carry a Zacks Rank #2 (Buy). The long-term expected earnings per share growth rate for Core-Mark, ICF International and Paychex and is 13%, 10% and 8.4%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>