Waste Management Inc (WM)

Conclusion

Waste Management provides collection, transfer, recycling, landfill gas-to-energy and regulated waste services to residential, commercial, industrial and municipal customers in the United States, Canada and Western Europe. At a price of 236.61 USD on 2026-11-09, the company has a market capitalisation of 94.08 billion USD.

The verdict is fair. The P/E of 30.6x sits against a ten-year median of 31.6x, and EV/EBITDA of 14.8x against 15.0x, so the earnings multiples are close to their own history. Price-to-book of 9.5x is above its median of 8.0x. The DCF gives 232.30 USD per share at a discount rate of 8.87%, and the fair value from historical multiples is 240.34 USD. The fair value band runs from 189.06 to 283.58 USD with a midpoint of 236.32 USD, a margin of safety of -0.1% at the current price. The reverse DCF implies growth of 8.7% a year, against revenue growth of 10.6% a year over five years and free cash flow per share growth of 10.8%.

The strongest numbers are free cash flow conversion of 121.8% over the last twelve months, ROIC of 11.5% against a WACC of 7.9%, and a Piotroski score of 7 out of 9. The weakest are net debt of 2.9x EBITDA, a current ratio of 0.82, and next-year estimates cut by 2.1% over 90 days, with seven downgrades against three upgrades in the last 30 days.

Financial health

The colour is yellow: none of the four measures of financial strength is assessed as good or bad, and all four are neutral. The current ratio is 0.82 and the quick ratio 0.72, both below 1 and in the watch range. Net debt is 2.9x EBITDA on a trailing basis, debt to equity is 2.37, and interest coverage is 5.2x. The Altman Z-score is 2.97, in the grey zone. The Altman model was designed for manufacturers, so this reading is indicative only for a waste business. Insolvency risk: low, about 1.5% by the estimate of the Ohlson model over one to two years, based on 2025-12-31 figures.

Earnings quality

The colour is green, supported by free cash flow conversion of 121.8% trailing and 94.7% over five years, a Piotroski score of 7 out of 9, and a Beneish M-score of -2.48, which reads as unlikely to signal manipulation. The accrual ratio is -7.4%, meaning cash generation exceeds reported earnings. Stock-based compensation is 0.3% of revenue, and free cash flow after it is 3.67 billion USD. The share count fell at a compound 1.0% a year over five years, consistent with buybacks. Earnings beat expectations in 4 of the last 8 quarters and missed in the other 4, with an average surprise of 0.3%. Estimate revisions are negative: the current year is down 0.4% over 90 days and the next year is down 2.1%.

Profitability

The colour is green. The operating margin of 18.5% is assessed good and sits against a ten-year median of 17.9%. The net margin of 11.8% compares with a median of 11.0%, and the gross margin of 32.2% with a median of 28.1%. Margin stability over the period is 4.3%. ROIC is 11.5% against a WACC of 7.9%, giving a ROIC minus WACC of 3.6%, and the five-year median ROIC is 10.5%. ROE of 31.1% overstates the picture. The DuPont split shows a net margin of 10.7%, an asset turnover of 0.55 and an equity multiplier of 4.59, so leverage supplies much of the return on equity.

Growth

The colour is green. Revenue compounds at 8.6% over three years, 10.6% over five and 6.9% over ten. EPS compounds at 7.5% over three years, 13.7% over five and 15.0% over ten. Free cash flow per share compounds at 14.1%, 10.8% and 9.6% over the same periods. Revenue grew in 9 of the 10 comparable years. The next-year EPS estimate implies growth of 10.5%, although estimates have recently been cut.

Valuation

The colour is yellow, because the verdict is neutral. Against ten-year medians, the P/E of 30.6x carries a premium of -3.0%, EV/EBITDA of 14.8x a premium of -1.3%, and price to free cash flow of 25.2x a premium of -3.9%. Price-to-sales of 3.6x shows a premium of 10.1%, and price-to-book of 9.5x a premium of 19.3%. The DCF gives 232.30 USD per share at a discount rate of 8.87%, with 59.1% of value in the terminal value. The fair value band is built on fixed assumptions, including a 5% equity risk premium and capped growth, so it is an order of magnitude rather than a price target. The reverse DCF implies growth of 8.7%, against revenue growth of 10.6% and free cash flow per share growth of 10.8% over five years; the given gaps are -1.9% and -2.2%. The dividend yield is 1.6% and the payout on free cash flow is 39.4%.

Risks

Net debt of 2.9x EBITDA and interest coverage of 5.2x mean that higher rates or weaker operating earnings would absorb more of the cash flow. A current ratio of 0.82 means short-term obligations exceed liquid assets, so the company depends on refinancing or operating cash flow to meet them. Negative estimate revisions suggest analysts expect slower earnings ahead. The margin of safety is negative, so the current price already reflects the central case. The Altman Z-score is weakened as a guide by the model's design for manufacturers. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the mix of earnings cannot be examined directly.