WM Stock Analysis - is Waste Management's Stock a Good Buy Today - $WM | Summary and Q&A

TL;DR

Waste Management is the largest waste operator of non-hazardous materials in North America, with a stable revenue stream but volatile net income. A fair value of $112 per share is determined through discounted free cash flow valuation.

Key Insights

• 🌎 Waste Management is the largest waste operator of non-hazardous materials in North America.
• 👔 The company's revenue is affected by the broader economy, but its contracts tied to inflation provide some revenue stability.
• 🇨🇷 Waste Management has focused on improving cost infrastructure and operational efficiency.
• 🥶 Net income and free cash flow have shown positive growth, supported by enhanced efficiency efforts.
• 🥶 Analyst projections indicate a potential dip in free cash flow due to capital expenditures and the economic downturn.
• 🙃 Waste Management's stock price has fallen in line with broader market declines, but the fair value analysis suggests a potential 12% upside.
• 🧑‍🏭 Personal margin of safety and risk tolerance are important factors in determining the attractiveness of Waste Management stock.

Transcript

hi I'm Jimmy in this video we're gonna take a quick look at waste management ticker symbol WM the goal of this video is to better understand waste management's business and then have a quick look at their numbers and then see if we can come up ultimately with a fair value for waste management stock okay so let's jump right in with waste management'... Read More

Questions & Answers

Q: How is Waste Management's business affected by the broader economy?

Waste Management's revenue is influenced by the economy, although it is less impacted compared to other businesses. While business closures during the coronavirus pandemic may reduce waste generation, increased waste from households helps offset the impact.

Q: What helps make Waste Management's revenue more predictable?

Waste Management has contracts tied to inflation, which accounts for about 35% of their total revenue. This arrangement ensures that as inflation increases, the company's revenue also rises, providing stability.

Q: How has Waste Management improved its efficiency in recent years?

Waste Management has focused on upgrading its collection trucks to automated trucks, aiming to enhance cost savings and overall operational efficiency. However, this initiative requires initial investments, potentially leading to increased costs in the short term.

Q: What is the fair value of Waste Management stock?

Based on a discounted free cash flow valuation, Waste Management's stock has a fair value of approximately $112 per share. This valuation considers analyst estimates, discounting future cash flows, and incorporating a perpetual growth rate of 2.5%.

Summary & Key Takeaways

• Waste Management operates in North America and is the largest waste operator of non-hazardous materials, owning landfills, recycling centers, collection operations, and transfer stations.

• The company's revenue has gradually increased over the years, although it is affected by economic fluctuations, with some contracts tied to inflation providing revenue stability.

• Waste Management has focused on improving cost infrastructure and efficiency, which has contributed to growth in net income and free cash flow.