A Look At Waste Management (WM) Valuation After Strong Growth Margins And Operational Improvements

Recent attention on Waste Management (WM) centers on two themes: solid financial metrics such as 10.9% annual revenue growth and strong margins, and leadership efforts aimed at improving safety and workforce engagement.

See our latest analysis for Waste Management.

Despite the focus on safety and operations, Waste Management’s latest share price of $218.4 comes after a 2.3% 1 month share price return, while its 1 year total shareholder return of 9.9% and 5 year total shareholder return of about 1.0x indicate momentum that has built over longer periods rather than in the very short term.

If Waste Management’s steady profile appeals to you, it could be a good moment to see what else is out there with strong core businesses, including fast growing stocks with high insider ownership.

With revenue growth of 5.2%, net income growth of 13.6% and a current price of $218.4 that sits below some valuation estimates, the real question is whether Waste Management is still attractively priced or if the market is already factoring in future gains.

Most Popular Narrative Narrative: 11.4% Undervalued

The widely followed narrative sets a fair value of US$246.52 against Waste Management’s last close of US$218.40. This leaves a valuation gap that hinges on earnings and margin assumptions.

The implementation of technology to supplement the workforce and optimize cost structures is expected to be a significant differentiator for Waste Management, potentially leading to improved net margins. The adoption of automation and technology, such as automated recycling facilities, is leading to improved EBITDA margins, which might provide stronger future earnings.

Read the complete narrative.

Curious what kind of revenue pace, margin expansion and future earnings level are baked into that valuation gap? The narrative ties them together with a premium profit multiple. The full set of assumptions shows how those moving parts could support that higher fair value.

Result: Fair Value of $246.52 (UNDERVALUED)

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

However, that upside story relies on continued tax credits and smooth Stericycle integration, and setbacks on either front could quickly challenge the current margin hopes.

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

Build Your Own Waste Management Narrative

If you see the numbers differently or prefer to test your own assumptions, you can pull up the data and build a custom view in minutes. Do it your way.

A great starting point for your Waste Management research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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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