• If you are wondering whether Waste Connections at around US$157 per share looks attractively priced or stretched, the starting point is to understand what the current valuation is really implying.
• The stock has seen a 4.6% decline over the past week, a 5.0% decline over the past month, and is down 9.7% year to date and 18.3% over the past year, even though the 3 year and 5 year returns stand at 16.4% and 48.9% respectively.
• Recent coverage has focused on how the share price pullback sits against the company’s longer term record and whether that gap reflects changing sentiment on risks or simply a reset in expectations. This context matters for you because any reassessment of risk or quality can influence how much you might be willing to pay for the same stream of future cash flows.
• Right now, Waste Connections carries a valuation score of 3 out of 6, which means it screens as undervalued on half of the checks used, and the next sections will compare different valuation approaches before circling back to a more rounded way to think about what the stock may be worth.

Approach 1: Waste Connections Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes the cash flows a company is expected to generate in the future and discounts them back to today, to estimate what the business might be worth right now.

For Waste Connections, the latest twelve month Free Cash Flow stands at about $1.27b. Analysts have provided explicit forecasts out to 2030, with projected Free Cash Flow of $2.29b in that year. Later years are extrapolated using Simply Wall St estimates under a 2 Stage Free Cash Flow to Equity model.

When those projected cash flows are discounted back to today, the DCF model points to an estimated intrinsic value of about $235.08 per share. Compared with a current share price around $157, the model implies the stock trades at roughly a 33.1% discount, which screens as meaningfully undervalued on this cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Waste Connections is undervalued by 33.1%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.

Approach 2: Waste Connections Price vs Earnings

For a profitable company, the P/E ratio is a useful way to see how much you are paying for each dollar of earnings, and to compare that price tag with other stocks and with what might be considered normal for the business.

What counts as a fair P/E largely reflects how the market views the company’s growth prospects and risk. Higher expected growth and lower perceived risk can justify a higher multiple, while slower growth or higher risk usually argue for a lower one.

Waste Connections currently trades on a P/E of 37.32x. That sits above the Commercial Services industry average of 22.97x and also above the peer average of 34.06x. Simply Wall St’s Fair Ratio for Waste Connections is 27.38x, which is a proprietary estimate of what the P/E might be, given the company’s earnings growth profile, margins, industry, market cap and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with peers or the broad industry because it is tailored to Waste Connections rather than a generic group. Set against the current 37.32x P/E, the Fair Ratio of 27.38x suggests the shares are trading on a richer multiple than those fundamentals imply.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Waste Connections Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as simple stories that connect your view of Waste Connections, including assumptions about future revenue, earnings and margins, to a financial forecast and a fair value on Simply Wall St’s Community page. This allows you to compare that fair value with the current price, see how different investors might justify a higher target of US$225 or a lower one of US$156, and have those Narratives refresh automatically when new results or news arrive.

Do you think there's more to the story for Waste Connections? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.