Waste Management, Inc. (WM - Get Rating) offers waste management environmental services to residential, commercial, industrial, and municipal customers in North America.

It offers collection services, including picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility (MRF), or disposal site; and owns, develops, and operates landfill gas-to-energy facilities.

The stock has gained 5.5% over the past year to close its last trading session at $151.03. This performance compares to the VanEck Vectors Environmental Services ETF’s (EVX) 9% loss over this period.

WM is expected to continue gaining from various trends like rising environmental issues, rapid industrialization, an increase in population, and robust government measures to reduce illegal dumping.

Jim Fish, WM’s President and Chief Executive Officer, said, “I am proud of how we continue to respond to inflationary pressures in our business.” He also stated, “In addition, the key leading performance indicators within our business, such as special waste volumes, construction and demolition volumes, and new business formation, point to continued strong economic activity and business performance for the balance of the year.”

Here is what could help WM keep outperforming its sector:

Latest Developments

In May, WM announced that it would redeem the entire outstanding principal amount of its 2.90% Senior Notes due 2022. The redemption date for the Notes was June 15, 2022. The aggregate principal amount of the Notes outstanding is $500 million.

The redemption price for the Notes is equal to 100% of the aggregate principal amount of the Notes, plus accrued and unpaid interest on the Notes to the Redemption Date.

Robust Financials

For the first quarter ending March 31, 2022, WM’s revenue increased 13.4% year-over-year to $4.66 billion. Its adjusted operating income grew 16.5% from its year-ago value to $803.00 million, while its adjusted net income amounted to $540.00 million, up 20% from its prior-year quarter. The company’s adjusted EPS rose 21.7% year-over-year to $1.29.

Strong Profitability

WM’s trailing-12-month net income margin of 10.32% is 56.4% higher than the industry average of 6.60%. In addition, its trailing-12-month gross profit margin of 37.77% is 27.6% higher than the 29.59% industry average. Also, its trailing-12-month ROE, ROC, and ROA are 83%, 34.2%, and 27.1% higher than the respective industry averages.

Impressive Growth Prospects

Street expects WM’s revenues to rise 14.3% in the current quarter, 8.1% in the current year, and 5.3% next year. The EPS is expected to rise 11% In the current quarter, 15.9% in the current year quarter, and 10.7% next year. In addition, WM’s EPS is expected to rise at an 11.7% CAGR over the next five years.

Consensus Rating and Price Target Indicate Potential Upside

Out of the 10 Wall Street analysts that rated WM, four rated it Buy, and six rated it hold. The 12-month median price target of $172.30 indicates a 14.1% potential upside. The price targets range from a low of $160 to a high of $185.00.

POWR Ratings Reflect Solid Prospects

WM has an overall A grade, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. WM has a B grade for Growth, Stability, and Quality. WM’s 0.78 beta is consistent with its Stability grade. Its impressive financial performance and growth attributes justify the Growth grade. In addition, its higher-than-industry profitability is in sync with the Quality grade.

Among the 15 stocks in the B-rated Waste Disposal industry, WM is ranked #1.

Beyond what I stated above, we have graded WM for Sentiment, Value, and Momentum. Get all WM ratings here.

Bottom Line

The company’s strong revenue growth across all segments has raised investor confidence about its future performance. Given the stock’s higher-than-industry profitability and solid growth attributes, we think it could be an opportune time for investors to scoop up its shares.

How does Waste Management, Inc. (WM) Stack Up Against its Peers?

WM has an overall POWR Rating of A, which equates to a Strong Buy. Check out these other stocks within the Waste Disposal industry with A (Strong Buy) ratings: Republic Services Inc. (RSG - Get Rating) and Heritage-Crystal Clean, Inc. (HCCI - Get Rating).

WM shares were trading at $149.85 per share on Wednesday morning, down $1.18 (-0.78%). Year-to-date, WM has declined -9.47%, versus a -20.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

More Resources for the Stocks in this Article