Waste Connections has been treading water for the past six months, holding steady at $184.65. The stock also fell short of the S&P 500’s 5.2% gain during that period.

Is now the time to buy WCN? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.

Why Does WCN Stock Spark Debate?

Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE:WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.

Two Things to Like:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Waste Connections’s sales grew at an excellent 13.1% compounded annual growth rate over the last four years. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Waste Connections has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 14.5% over the last five years.

One Reason to be Careful:

Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Waste Connections has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

Final Judgment

Waste Connections has huge potential even though it has some open questions. With its shares underperforming the market lately, the stock trades at 34.8× forward price-to-earnings (or $184.65 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than Waste Connections

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