Waste Management is North America’s largest provider of comprehensive waste management environmental services. The company serves residential, commercial, industrial, & municipal customers. Founded in 1968, the company is headquartered in the First City Tower in Houston, Texas. This week, I fundamentally analyze Waste Management’s stock. I review WM’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Waste Management’s 2020 free cash flow of $1,771 million figure, a 6% growth rate of FCF (growth for the next 10 years), 7.5% discount rate, 4% long term growth rate (growth from 10 year mark to perpetuity), 425 million shares outstanding, and $13,259 million of long term debt, the DCF analysis yields us an intrinsic value of $113.49 per share. Using the current stock price of about $148 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 2.0% if we hold this security through 2060.
Timestamp
0:00 Introduction
0:38 Business Overview
4:45 Key Ratios Analysis
13:27 Discounted Cash Flow Analysis / Intrinsic Value
15:35 Expected Rate of Return Calculation
16:38 Summary / Conclusion
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References:
Waste Management’s Website: here.
Morningstar Key Ratios Link: here.
Useful Resources here.
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