5-Star Stocks Poised to Pop: Waste Management

By Brian D. Pacampara | More Articles
September 7, 2011 | Comments (2)

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, trash hauler Waste Management (NYSE: WM ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Waste Management's business and see what CAPS investors are saying about the stock right now.

Waste Management facts

Headquarters (Founded)	Houston (1987)
Market Cap	$14.5 billion
Industry	Waste management
Trailing-12-Month Revenue	$12.9 billion
Management	CEO David Steiner (since 2004) CFO Robert Simpson (since 2004)
Return on Equity (Average, Past 3 Years)	16%
Cash/Debt	$371 million / $9.1 billion
Dividend Yield	4.4%
Competitors	Casella Waste Systems (Nasdaq: CWST ) Republic Services (NYSE: RSG ) Waste Connections (NYSE: WCN )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 98% of the 2,385 members who have rated Waste Management believe the stock will outperform the S&P 500 going forward. These bulls include fellow Fool Nathan Alderman (TMFNato), who is ranked in the top 5% of our community, and idahogeo.

Just last month, Nathan tapped Waste Management as an ideal long-term opportunity: "We'll always have garbage. And this company isn't just hauling the stuff away -- it's finding new and innovative uses for the stuff we throw out, from recycling to alternative energy generation."

Waste Management's three-year average return on equity (16%) even tops that of competitors Republic Services (6%) and Waste Connections (10%), let alone Casella's -37% average ROE.

CAPS member idahogeo elaborates on the bull case:

The trash needs to be picked up every week and no one picks up more trash than [Waste Management], so the core business is relevant for the long haul (pun intended). In addition, there is growth potential in energy production (landfill gas is largely methane) and raw materials can be extricated from the recycling stream.

What do you think about Waste Management, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Interested in another easy way to track Waste Management? Add it to your watchlist.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Waste Management. Motley Fool newsletter services have recommended buying shares of and writing a covered strangle position on Waste Management, as well as buying shares of Republic Services. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (2) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On September 08, 2011, at 11:29 AM, Mike91335 wrote:

WCN has spectacular growth. Up over some 112% in five years while WM stock is actually down over that period. Of course WM pays a nice dividend, especially compared to WCN. What is your projected price for WM, if I may ask?
Report this Comment On September 10, 2011, at 3:25 PM, shaneIan wrote:

I'm fairly new to the investment community so I have a few questions regarding some personal concerns with this stock. I've heard a lot of hype over WM, but when i take a look at their financials, I have some concerns. I see that Net Income, Gross Profit Margin, Net Profit Margin, ROE, and ROI have consistently gone down over the past 5 years (going back to 2006). Also there statement of cash flow shows a Cash From Operating Activities decreasing the last few years, with negative Net Change in Cash for 2010. I admit its hard to tell exactly what is behind cash flow but tying that into decreases in income/etc mentioned above, it seems like red flags would be going off. I was also unable to find how much revenue they dedicate to R&D, as that would seem like a very important factor in their projected growth.
So i guess I'm finding it difficult to justify buying this stock, even though I have recently read a lot of positive reviews of WM (from people who have a lot more experience and expertise than I do), and I'm wondering what I am missing. I understand the sustainability in the market of waste and recyclables, but my concern is with the company itself.

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