Why Waste Connections (WCN) Is Getting Attention Today

Waste Connections (WCN) has drawn fresh attention after its shares gained 8.6% over the past 3 months, outpacing both its industry and the broader market during that period.

Zooming out, Waste Connections has seen a 7.5% share price return over the past three months but is still down 4.2% year to date. Meanwhile, a 1-year total shareholder return decline of 7.2% contrasts with a 3-year total shareholder return of 22.8%, suggesting longer term momentum remains more resilient than the recent pullback.

Spot 52 high quality undervalued stocks that may offer similar quality characteristics to Waste Connections while still trading at more modest valuations. For Waste Connections, the bullish story leans on solid recent gains and a longer term record of total returns. The cautious view points to this year’s share price decline. Do the current valuation markers justify that optimism?

Most Popular Narrative: 18.2% Undervalued

The most followed narrative pegs Waste Connections at a fair value of $203.92, compared with the recent $166.81 close, implying a sizeable valuation gap that hinges on specific growth and profitability assumptions.

Robust acquisition activity, with annualized revenues closed already over $125 million, and a strong balance sheet position Waste Connections well for continued growth and successful integration of acquisitions, supporting future revenue and earnings growth.

Read the complete narrative. Read the complete narrative.

Want to see what is behind that upbeat acquisition story? The narrative leans heavily on steadier revenue growth, rising margins and a premium future earnings multiple. It is worth asking which assumptions do the heavy lifting in that fair value.

Result: Fair Value of $203.92 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, investors also need to weigh that Waste Connections leans heavily on acquisitions and is exposed to volatile commodity linked revenues, which could challenge those optimistic assumptions.

Find out about the key risks to this Waste Connections narrative.

Another View On Waste Connections Valuation

While the narrative fair value for Waste Connections points to an 18.2% gap to the current $166.81 share price, the earnings multiple sends a different signal. WCN trades on a P/E of 39.6x, compared with a fair ratio of 26.4x and a US Commercial Services average of 19.2x. That is a sizeable premium. Is this pricing in quality, or just leaving less room for error?

For investors weighing that higher P/E against the wider sector and fair ratio, it can help to see the detailed breakdown behind the earnings based valuation inputs. See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

The mix of optimism and concern around Waste Connections is clear, so consider acting while this information is fresh and test the data against your own process. To see both sides in one place and judge the trade off for yourself, take a look at the 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Waste Connections?

If Waste Connections has you thinking more seriously about your portfolio, do not stop here. Use focused stock lists to uncover fresh ideas that match your style.

• Target value opportunities by scanning a curated 52 high quality undervalued stocks that filters for companies combining quality fundamentals with more modest pricing.
• Strengthen your income stream by checking a 11 dividend fortresses focused on higher yield companies that still aim to keep payouts supported by underlying cash flows.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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