Competitor Comparison: Which Waste Management Companies Are a Buy?

There's little cyclicality in trash. Day in, day out, we throw out tons of stuff that must be collected and hauled to the landfill.

And yet there are some pretty high barriers to competition. People generally resist new landfills (classic NIMBY, anyone?), and companies without landfills must pay other companies to let them dump. Companies also contract with municipal entities and businesses, a situation that doesn't permit a lot of switching. And finally, running a waste management company requires serious investment in trucks, people, and technology.

Nimble they're not. But if you want a workhorse that's not unduly subject to market fluctuations, in other words, you might consider waste management companies.

The numbers
Who are the major waste companies, and how do they stack up to one another?

Company

Market Cap (in millions)

Revenue, LTM (in millions)

Free Cash Flow, LTM (in millions)

Owned / Operated Active Landfills

CAPS Rating

Waste Management (NYSE: WM  )

$15,244

$11,916

$1,230

273

*****

Republic Services (NYSE: RSG  )

$10,886

$8,096

$341.9

192

***

Stericycle (Nasdaq: SRCL  )

$4,930

$1,236

$237.7

6

**

Waste Connections (NYSE: WCN  )

$2,730

$1,236

$187.7

43

*****

Clean Harbors (NYSE: CLH  )

$1,658

$1,223

$18.3

9

***

Casella Waste Systems (Nasdaq: CWST  )

$107

$511

$27.3

10

*

Waste Services (Nasdaq: WSII  )

$533

$458

$37.0

7

**

Data from Capital IQ, a division of Standard & Poor's, and the Motley Fool CAPS database.

It's important to keep track of revenue, but free cash flow gives us a better sense of what the company is doing with that revenue -- and whether they'll have the funds to invest in the business later. Companies who don't own or operate their own landfills have to pay what are called "tipping fees" to add to the landfill -- which means companies who do own their own have a built-in advantage.

Our CAPS community of investors likes Waste Management, and it's easy to see why. As CAPS player jflurett says, "Huge moat, nice dividend, virtually no potential for competitors."

Which waste management company do you like and why? Let us know in the comments.

Fool editor Julie Clarenbach doesn't own any of the companies mentioned here. Waste Management is a Motley Fool Inside Value pick. Stericycle is a Rule Breakers recommendation. Republic Services and Waste Management are Income Investor picks. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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