• Wondering whether Waste Management's current share price reflects its true value, or if you might be paying too much for a steady, essential service stock.
• The stock recently closed at US$220.52, with returns of a 4.3% decline over 7 days, a 5.7% decline over 30 days, a 1.0% gain year to date, and a 4.9% decline over the past year. The 3 year and 5 year returns stand at 35.4% and 72.5% respectively.
• Recent coverage has focused on Waste Management's position as a core provider in the Commercial Services sector and how investors are reassessing pricing for companies tied to essential infrastructure. This backdrop helps explain why the stock has seen mixed shorter term returns alongside stronger 3 year and 5 year figures.
• Right now, Waste Management scores a 2 out of 6 on one valuation framework. The rest of this article will walk through the key valuation approaches used for the stock, then finish with a way of thinking about value that many investors may find more useful than any single metric.

Waste Management scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

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

A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back to today using a required rate of return, aiming to translate all those future dollars into a single present value per share.

For Waste Management, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $2.9b. Analyst estimates are provided for several years, and then Simply Wall St extrapolates further, with projected free cash flow of about $4.5b in 2030. Ten year projections in the model range from around $3.8b in 2026 to about $4.9b in 2035, all in $ and then discounted back to today.

On this basis, the DCF model arrives at an estimated intrinsic value of about $241.98 per share, compared with the recent share price of $220.52. That implies the stock is 8.9% below this model’s estimate of fair value, which sits within a reasonable margin of error for long term forecasts.

Result: ABOUT RIGHT

Waste Management is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Waste Management Price vs Earnings

For a profitable company, the P/E ratio is a simple way to connect what you pay for each share with the earnings that support it. Put plainly, it shows how many dollars investors are paying today for each dollar of current earnings.

What counts as a “normal” P/E depends on how quickly earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually calls for a lower one.

Waste Management currently trades on a P/E of 31.69x. That is above the Commercial Services industry average of 20.65x, but below a peer group average of 34.29x. Simply Wall St’s proprietary “Fair Ratio” for Waste Management is 30.09x. This Fair Ratio reflects factors such as the company’s earnings growth profile, industry, profit margins, market cap and key risks, which makes it more tailored than a simple comparison with peers or the wider industry.

With the current P/E of 31.69x sitting reasonably close to the Fair Ratio of 30.09x, the stock appears broadly in line with what this framework suggests.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Waste Management Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Think of a Narrative as your own clear story about Waste Management that links what you believe about its future revenue, earnings and margins to a financial forecast, a fair value, and ultimately to decisions about whether the current price around US$220 is attractive compared with a more cautious view closer to US$198 or a more optimistic view near US$277. All of this is available within an easy tool on Simply Wall St's Community page that updates as new news or earnings arrive, so you can see how your story stacks up against others and adjust your stance without needing to rebuild spreadsheets from scratch.

Do you think there's more to the story for Waste Management? 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.