Waste Management, Inc. (NYSE:WM) calls itself an environmental solutions firm. Now, that may sound like branding speak or marketing spin, but WM has truly transformed itself from a company that once simply managed industrial, corporate and individual waste to one that has found a way to turn that trash into treasure.
As the nation’s leading waste disposal company, once WM found a way to make the tons of garbage it collects daily into a revenue stream, it had multiple sources of income. It was getting paid to collect garbage, and it was getting paid to sell the back-end product.
One Man’s Trash…
The back-end product, in this case, is renewable energy. WM now has more than 135 beneficial-use landfill-gas projects that make enough energy to power half a million homes with electricity. And, this doesn’t even take into account the recycled plastics and metals that can be sold back to the industry to be re-processed. WM’s goal is to process 20 million tons of recycled materials by 2020 (last year, the company processed 15 million tons).
This is the way WM has taken its dirty core business and not only made it cleaner, but cleaned up in the process. Now, all the waste in the landfills is biologic, which helps it break down. As it breaks down, it lets off methane gas. WM then traps the gas and either sells it off or sends it to a utility that can directly convert it into electricity. Either way, WM gets paid.
Because of its sheer size, this is a growing source of income and feeds a virtuous circle for WM’s business in the U.S. and Canada.
…Is Another Man’s Treasure
And, that revenue continues to show up in the most important spot, WM’s bottom line. Management reported Q4 and full-year earnings in mid-February, and while the company missed slightly on earnings, it posted strong growth in revenue for both the quarter and the year.
The fact is, the population grows and so does the amount of trash it generates. By not seeing the landfill as the end of the revenue stream, WM has literally tapped into major new growth opportunities that will continue to expand. And, given its national exposure, WM has a reach that very few competitors have. Simply put, the company has a very wide competitive moat in a business with significant barriers to entry as well.
In the past 12 months, WM stock has handily outperformed the major indexes, up 26% while delivering a 2.3% dividend. But, the dividend is just a bonus. The trend here is continued growth; the stock is up 105% in the past five years, which shows this isn’t a recent fluke. WM is far more treasure than trash.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.