Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
Waste Connections, Inc.’s (NYSE:WCN) latest earnings announcement in December 2018 indicated that the company faced a slight headwind with earnings declining from US$577m to US$547m, a change of -5.2%. Below is my commentary, albeit very simple and high-level, on how market analysts view Waste Connections’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for the coming year seems buoyant, with earnings expanding by a robust 20%. This growth seems to continue into the following year with rates reaching double digit 33% compared to today’s earnings, and finally hitting US$755m by 2022.
While it’s informative knowing the growth each year relative to today’s level, it may be more valuable to determine the rate at which the earnings are moving every year, on average. The benefit of this method is that we can get a bigger picture of the direction of Waste Connections’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 13%. This means, we can assume Waste Connections will grow its earnings by 13% every year for the next few years.
For Waste Connections, there are three essential factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is WCN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether WCN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WCN? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.