One of my favorite quotes comes from “Rich Dad Poor Dad” author Robert Kiyosaki. “In 1971, the U.S. and [President] Nixon convinced the entire world to replace gold and silver with paper money…this stuff: cash is trash.” Well, I’d sure love to be Mr. Kiyosaki’s sanitation manager because I’d be picking up his trash all day. And that brings us to waste management stocks.
Of course, we all understand that cash is not trash. And apparently, due to a logical fallacy known as affirming the consequent, it doesn’t necessarily follow – even if we were to grant the existence of the Kiyosaki paradigm – that trash is cash. However, the closest we can get to the latter is by acquiring waste management stocks.
That’s because of the concept called the circular economy. In this system, a continual process of reuse and regeneration of materials and products promote overall economic productivity in a sustainable or environmentally conducive manner.
So, in some sense, trash is indeed cash. Here are some waste management stocks to forward the next wave in alchemy.
Waste Management (WM)
You can’t really talk about waste management stocks without mentioning the self-explanatory business Waste Management (NYSE:WM). One of the giants in the sector, the company employs 48,000 full-time workers. Primarily, it’s known for its trash collection services and landfill management. However, it’s also making a name for itself for its various recycling initiatives, thus aligning with the circular economy.
As you might imagine, WM isn’t the sexiest investment out there. However, it’s consistent. In the past year since the second quarter, the company delivered an average earnings per share of $1.74. In contrast, analysts anticipated an average print of $1.62, thus yielding an earnings surprise of 7.78%. This consistency helps WM support its forward yield of 1.46%.
Right now, shares trade hands at 3.95X trailing-year sales. In contrast, the metric during Q2 stood at 4.18X. Also, in the past year, the ratio averaged 3.8X. Therefore, it’s relatively undervalued. Even better, analysts are modeling fiscal 2024 sales to hit $21.56 billion. That would be up 5.5% from last year’s tally of $20.43 billion.
Republic Services (RSG)
Another power player in the field of waste management stocks, Republic Services (NYSE:RSG) offers similar services to its rivals. Employing about 41,000 full-time workers, Republic offers a range of collection and processing services, including solid and industrial waste management and disposal. However, the company has also upped its recycling game, making it a partner for the circular economy.
Like its mainline rival, Republic provides its shareholders with a consistency of performance that few can match. In the past year, the company posted an average EPS of $1.50. In contrast, experts were anticipating $1.40, thus yielding an earnings surprise of 7.6%. The profits help support Republic’s forward yield of 1.15%.
Presently, RSG stock carries a slightly higher multiple than Waste Management, trading at 4.09X sales. Further, in the trailing year, the multiple sat at 3.69X. Thus, Republic is trading at a relative premium.
It might be worth it, though. Analysts are modeling fiscal 2024 sales to hit $16.11 billion, up 7.7% from last year. And fiscal 2025 revenue may rise to $17.05 billion, up 5.8%.
GFL Environmental (GFL)
Based in Canada, GFL Environmental (NYSE:GFL) offers non-hazardous solid waste management and environmental services both in its home market and the U.S. Per its corporate profile, GFL specializes in solid and liquid waste management, along with soil remediation services. This includes collection, transportation, transfer, disposal and most important for our discussion, recycling.
GFL is smaller than the other two enterprises but it’s still one of the top waste management stocks, employing 20,000 full-time workers. As with its peers, GFL is consistently profitable although it doesn’t always hit its estimated EPS targets. In the past year since Q2, the company posted an average EPS of 12 cents. This figure missed the consensus view of 14 cents.
Still, for the lack of predictability, GFL stock makes up for it in terms of valuation. Currently, shares trade at 2.67X sales. That’s a modest bump up from the prior year’s average of 2.46X. What’s more, analysts are modeling fiscal 2024 sales to reach $5.77 billion, up 5.1% from last year’s print of $5.49 billion. Fiscal 2025 may be even better, with a top line forecasted to hit $6.17 billion.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.