While money doesn’t grow on trees, it can do so on trash, thus warranting a closer examination of top waste management stocks. Basically, the sector benefits from an unavoidable reality. Wherever there are people, there will be trash. Further, as the number of people rises – due to natural births and immigration – someone must deal with the rubbish created.
And that of course is where waste management stocks come in. No, it’s not a sexy industry – far from it. More than likely, most of us would rather have zero hands-on experience with this sector. Nevertheless, it’s a dirty job that requires addressing. Otherwise, the economy could quite literally crumble to a halt.
According to the U.S. Environmental Protection Agency, the total generation of municipal solid waste (MSW) tipped the scales at 292.4 million tons in 2018. That translates to 4.9 pounds per person, per day. Unsurprisingly, the North American waste management market size reached a valuation of $208 billion in 2019. And by 2027, this industry could be worth almost $230 billion.
It may be slow growth but it’s dependable growth. And on that note, below are top waste management stocks to consider.
Waste Management (WM)
An obvious idea among waste management stocks to consider is Waste Management (NYSE:WM), which offers comprehensive sector-related services in North America. Per its public profile, WM’s network includes 346 transfer stations, 293 active landfill disposal sites, and 146 recycling plants, among many other facilities. Since the start of the year, shares popped up 13%. In the trailing month, they gained almost 5%.
Primarily, WM’s core strengths lie in its operational resilience and consistent profitability. For example, its three-year revenue growth rate comes in at 9.5%, above the sector median of 7.6%. Its gross, operating, and net margins land at the top 70th percentile or greater. And it posted 10 years of net income over the past decade.
If there was an area to nitpick, it’s that WM isn’t exactly cheap. Because of its predictability, WM trades at a forward earnings multiple of 26.12X. That’s higher than nearly 74% of its peers. Still, analysts rate shares a moderate buy and the company offers a forward dividend yield of 1.58%.
Republic Services (RSG)
Another example of top waste management stocks, Republic Services (NYSE:RSG) provides an excellent alternative to Waste Management. A waste disposal specialist, Republic offers various solutions, including non-hazardous solid waste collection, waste transfer and disposal, and recycling and energy services. Per its public profile, it’s the second-largest provider in the industry behind WM.
While RSG might be the little sibling, there’s no question which one’s performing better at the moment. Since the beginning of the year, Republic shares jumped more than 27%. Part of the reason for the enhanced enthusiasm is the company’s earnings performances. Consistently, Republic tops estimates for earnings per share. And it usually beats on revenue too.
In contrast, WM has been hit or miss in the past few quarters, which may raise some eyebrows. Where the two meet is in the general financial profile. Like WM, Republic enjoys decent sales growth and consistent profitability. However, investors pay a premium to forward earnings of 28X.
Analysts rate shares a moderate buy with a $169.64 average price target.
Waste Connections (WCN)
Billed as an industry leader in waste management services throughout the U.S. and Canada, Waste Connections (NYSE:WCN) provides a full range of solutions. For residential customers, the company provides garbage and bulk pickup services, among other needs. For the commercial sector, it offers roll off dumpsters, compactors and portable toilets. As well, it manages special waste disposals.
Like many other waste management stocks, WCN printed a choppy price action this year. However, toward the end of 2023, it happens to be up over 12% since the January opener. Notably, in the trailing month, shares spiked up more than 11%. Financially, WCN benefits from the consistency and predictability inherent within the industry.
However, some of its metrics are noticeably superior to its peers. For example, WCN’s three-year revenue growth rate stands at 11.1%, beating out nearly 62% of its peers. Also, since the fourth quarter of 2022, WCN beat expectations for both EPS and revenue.
Finally, analysts rate shares a strong buy, with the high-side target coming in at $175.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
