Waste Connections Inc

Garbage collection is an age old industry that is never pretty, unless you invest in it. As with many industries that are indispensable to society, waste management investors know that nearly every city in the world requires some sort of garbage collection. This is for hygienic reasons as well as maintaining a livable city for its citizens, so over the years these stocks have been steady performers. Waste Connections (NYSE:WCN) may not be the first company you think of in this sector, but it operates in most major cities across the United States and Canada. It offers residential and commercial waste removal, as well as solid and liquid waste disposal, oilfield waste treatment and recovery, and movement of waste cargo and containers.
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Waste Connections operates a Canadian subsidiary known appropriately as Waste Connections Canada, which trades on the Toronto Stock Exchange. Waste Connections’ stock has performed admirably over the past year, with a 52-week trading range of $83.10 to $118.79, and is currently trading at just below its 52-week high levels. It is trading at a very reasonable five times sales and pays a small dividend yield of 0.70% annually.
The Bullish Case: This should be obvious: it operates in a sector that is very concentrated at the top, and is always in high demand. Waste Connections just beat Wall Street estimates with its Q1 earnings report that saw it report $0.70 per share in earnings compared to $0.65 per share last year.The company also saw $1.4 billion in revenue which rose year over year from $1.35 billion in 2020. The stock has seen nearly 300% steady growth over the past decade and has increased its dividend yield for the past eleven years. It is as solid as it comes for Waste Connections, and in an essential services industry with very little top-end competition, Waste Connections should theoretically continue to grow, albeit at a slow and steady pace.
The Bearish Case: Similar to the industry leader Waste Management (NYSE:WM), Waste Connections is somewhat limited by being a strictly North American company. Waste Management itself is a hindrance to Waste Connections, as it remains the top dog in North America along with Republic Services (NYSE:RSG). While the industry is concentrated, it is also top-heavy, which makes it difficult for Waste Connections to ever surpass the top dogs in terms of market share. While its price to sales is solid, Waste Connections trades at an inflated price to earnings ratio of 150, which fundamental analysts would say means the stock is overpriced. The balance sheet also carries a hefty amount of debt, although that seems to be normal in this industry.

Final Verdict on Waste Connections: It is a solid company that has performed well for shareholders over the years. If you want a steady, dividend paying stock that will never give you the high growth of other sectors, then the waste management sector is perfect for you. At this price level, we would definitely prefer investing in the industry leader Waste Management, which trades at a more reasonable ratio, and offers a higher dividend yield for investors.

Über den Autor

Sebastian Seiler

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