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Waste Connections, Inc. WCN has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth. The company has an expected long-term earnings per share (three to five years) growth rate of 9.1%.
Waste Connections’ shares have gained 12% over the past year, against 11.1% decline of the industry it belongs to.
Factors That Auger Well
Waste Connections typically targets secondary and rural markets to garner a higher local market share, which would be difficult to attain in more competitive urban markets. This decreases the company’s exposure to customer churn and helps improve financial returns.
In certain niche markets like E&P waste treatment and disposal, early mover advantage in rural basins play a key role in improving market positioning and generating higher financial returns. The company focuses on increasing market penetration and offering additional services to capitalize on future drilling opportunities in those areas. Waste Connections also aims to leverage its franchise-based platforms to expand customer base beyond the exclusive market territories.
Waste Connections generally focuses on providing vertically integrated services, from collection through disposal of solid waste in landfills that it owns or operates. In addition, the operations are managed on a decentralized basis to place the decision-making authority close to the customer, enabling easier identification and addressal of customers’ needs on a real-time basis in a cost-effective manner. This low-overhead, highly efficient operational structure allows the company to expand into geographically contiguous markets and operate in relatively small communities that other competitors may not find attractive.
Waste Connections’ cash and cash equivalent balance of $859 million at the end of third-quarter 2020 was well below the long-term debt level of $4.71 billion, underscoring the fact that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $84 million.
Zacks Rank & Key Picks
Waste Connections currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are CRA International, Inc. CRAI, Gartner, Inc. IT and Insperity, Inc. NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for CRA International, Gartner and Insperity is estimated at 13%, 13.5% and 15%, respectively.
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