Waste Connections, Inc. WCN has had an impressive run over the past year. The stock has gained 24%, outperforming the industry’s 20% rally.

The company has an expected long-term earnings per share (three to five years) growth rate of 12.4%. Earnings are expected to register year-over-year growth of 15.5% in 2024 and 12.2% in 2025.

Factors That Augur Well for WCN

Being a leading player in the waste management industry, Waste Connections will likely benefit from ongoing trends such as increasing environmental concerns, rapid industrialization, an increase in population and active government measures to reduce illegal dumping.

With the prime location of disposal sites being within competitive markets, Waste Connections has optimal asset positioning to generate higher profitability. Given the importance of and costs associated with waste transportation to treatment and disposal sites, having disposal capacity near the waste stream offers a competitive advantage and a barrier to entry.

Waste Connections has been active on the acquisition front. It follows a strategic combination of financial, market, and management criteria to evaluate opportunities from acquisitions. In new markets, it uses its initial buyout as an operating base. It seeks to strengthen the acquired operation's presence by providing additional services, adding customers, and making “tuck-in” acquisitions of other waste companies in that market or adjacent markets. In 2021, 2022 and 2023, Waste Connections completed 30, 24 and 13 acquisitions, respectively. These acquisitions significantly contributed to its revenues, with $215.39 million in 2021, $552 million in 2022 and $410.9 million in 2023.

Waste Connections consistently rewards its shareholders. In 2021, 2022, and 2023, it paid $220.2 million, $243 million, and $270.6 million in dividends, respectively. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business.

A Risk for WCN

Waste Connections’ current ratio (a measure of liquidity) at the end of third-quarter 2024 was pegged at 0.77, lower than the industry average of 1.00. A current ratio of less than 1 indicates that the company may have problems paying its short-term obligations.

Zacks Rank & Stocks to Consider

Waste Connections currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the broader Zacks Business Services sector are Climb Global Solutions, Inc. CLMB and Qifu Technology, Inc. QFIN.

Climb Global Solutions flaunts a Zacks Rank of 1 (Strong Buy) at present. It has a long-term earnings growth expectation of 16%. CLMB delivered a trailing four-quarter earnings surprise of 51.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Qifu Technology sports a Zacks Rank of 1 at present. It has a long-term earnings growth expectation of 20.9%. QFIN delivered a trailing four-quarter earnings surprise of 12.4%, on average.

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