I am suprised no one has commented on the strong quarter performance. It has validated my market entry at less than $11/share. I believe that conservative valuations suggest a great buy less than $14/share and a good buy less than $20/share. This is long-term view recognizing that the entire sector is down.
Looking forward the following needs to be considered in valuing WCNX:
1. Ratio of operating income to interest expense. This is an indication of a company's ability to pay down debt. To date, WCNX has been able to counter highter interest with verticle integration (higher operating margins) and lower purchase prices. However this ratio has dropped from 2.75 to 2.65. Further drops in this ratio should be examined carefully.
2. Ratio of net income to interest expense. A measure of increasing income relative to overall purchases. Going forward, it would be ideal if net income increased at a greater rate than interest expense.
Just some suggestions open to other view points.
At these prices, WCNX is a great buy. Going forward, investors need to consider realistic projections of growth. The current decline in the sector is a direct result of the lack of investor confidence.
When I entered the waste sector market a couple months back, I thought it could take 18 to 24 months to turn around. Given the strong response today, 12 months to reach the 52-week high appears feasible.
Finally, it looks like the waste sector is going to climb up out of the bottom of the landfill!! I hope all the 'trash'talking waste bashers of late, were smart enough to hang on, but if they didn't, too bad... I'll just have to chuckle a bit for them, especially if they were short (can't imagine anybody doing that though!!).
Jettcity, I agree with you one hundred percent! I have been expressing the same opinion, all along. I think WCNX has proven they have a solid plan and they integrate their acquistions very cost efficiently. If they continue to beat expectations, improve debt ratio, and continue with their tremendous growth, I believe they will be back close to their 52 week high in a year. What do you think about that??
As a consultant to several of these firms I keep pretty close tabs on what goes on. I believe WMI has bottomed out but will be very slow to gain investor confidence. WMI is the bellwether for the sector but I believe WCNX to be the more solid performer in the next 12-18 months.