Is Waste Management (WM) Still A Bargain After 49% Gains?

Waste Management has pulled back in the short term, yet the share price still sits on the back of a sizeable multi year run, which raises a simple question for investors. Are the cash flows that the business produces strong and reliable enough to justify where the stock trades today?

• The stock has gained 49.4% over the past 5 years, so a lot of the long term return story now hinges on whether those past gains line up with the cash it can generate.
• The company’s model of long term waste collection contracts and capital intensive disposal assets can support steady cash flow, but it also means valuation rests heavily on how efficiently those assets keep turning revenue into free cash over time.
• Prefer to judge Waste Management on earnings? See why Waste Management's 29.0x P/E tells a different valuation story.

The issue now is whether Waste Management’s current share price is appropriately anchored to the cash flows that investors can reasonably expect the business to produce over time.

If you are weighing Waste Management against other businesses on this same cash flow question, it can help to compare it with 32 high quality undervalued stocks.

Is Waste Management Still Cheap on Cash Flow?

The Discounted Cash Flow model values Waste Management on the cash it can return to shareholders over time, adjusted back to today’s dollars. On this view, the latest twelve month free cash flow sits at about $3.1b, with the projections assuming that this pool of cash generally grows rather than shrinks over the next decade.

Forecasts point to free cash flow rising into the mid $4b range by 2030, then easing into slower growth as Waste Management matures. This aligns with a business built on long contracts and heavy infrastructure. When those future streams are discounted, the DCF projections put Waste Management's estimated intrinsic value modestly above the current share price of $206.83, implying the market is not pricing in aggressive expansion but is still assigning a premium for the consistency of its cash generation. Find out what Waste Management could be worth using our Discounted Cash Flow (DCF) estimate.

The Waste Management Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Waste Management pick up where the cash flow puzzle leaves off. They spell out which paths for Waste Management's growth, margins and earnings would need to play out for the stock to be worth much more or much less than today’s price. Each one treats fair value as a specific thesis about the business that you can watch over time, rather than a one off snapshot on the Community page.

One of the top community narratives on Waste Management: 20% undervalued

"The main thing that has to go right is that Waste Management turns its large investments in healthcare solutions, recycling automation and renewable natural gas..."

Discover why this Narrative puts Waste Management at 20% undervalued.

Waste Management’s valuation still leaves one crucial angle unexplored

Numbers tell part of the story for Waste Management, but the people choosing where to invest capital and how they are rewarded for those choices can tilt long term outcomes in powerful ways. See who runs Waste Management and how they are paid.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com