• Wondering if Waste Management at around US$224.94 is priced for perfection or still has room on the upside? This article walks through the key signals that matter for value focused investors.
• The stock has seen a 4.7% decline over the last 7 days and a 2.3% decline over the last 30 days, while returns sit at 3.0% year to date and 0.6% over the past year, with longer term returns of 52.1% over 3 years and 88.1% over 5 years.
• Recent price moves sit against a backdrop of ongoing interest in essential service providers like Waste Management, with investors weighing the appeal of consistent, utility like businesses against changing expectations for future returns. Broader market focus on cash generation, balance sheet resilience and reliable income sources keeps names like Waste Management on many watchlists, which can influence how the stock trades.
• On Simply Wall St’s valuation checks, Waste Management currently holds a value score of 2 out of 6. The next sections will break this down across different valuation approaches, before finishing with a broader way to think about the company’s value in a real world portfolio context.

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 estimates what a business could be worth by projecting its future cash flows and discounting them back to today using a required rate of return. It is essentially asking what the future stream of cash is worth in present day dollars.

For Waste Management, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month free cash flow sits at about $2.56b. Analyst inputs and extrapolated estimates point to projected free cash flow of $5.08b in 2035, with intermediate years such as 2026 and 2030 sitting at $3.77b and $4.59b respectively. Simply Wall St uses direct analyst forecasts where available, then extends the series beyond the typical 5 year window using its own assumptions.

Bringing all of these projected cash flows back to today results in an estimated intrinsic value of about $245.78 per share. Compared with the recent share price of around $224.94, the DCF output suggests Waste Management is roughly 8.5% undervalued, which is a relatively small gap and points to pricing that is quite close to this model’s estimate.

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 consistently profitable company, the P/E ratio is a straightforward way to connect what you pay for each share with the earnings that support it. It gives you a quick sense of how many dollars investors are currently willing to pay for one dollar of earnings.

What counts as a “normal” P/E depends on how investors view growth potential and risk. Higher expected earnings growth or perceived resilience can support a higher P/E, while more uncertainty or weaker prospects usually point to a lower one.

Waste Management currently trades on a P/E of 33.50x. That sits above the Commercial Services industry average P/E of 22.90x and a little below the peer average of 35.05x, which suggests investors are willing to pay a premium to the broader industry but are broadly in line with closer peers.

Simply Wall St’s Fair Ratio for Waste Management is 31.23x. This proprietary metric aims to estimate a more tailored “fair” P/E by factoring in elements such as earnings growth, profit margins, risk profile, industry and market cap, rather than relying only on simple peer or industry comparisons.

With the current 33.50x P/E sitting above the 31.23x Fair Ratio, the shares screen as slightly expensive on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.

Upgrade Your Decision Making: Choose your Waste Management Narrative

Earlier the article mentioned that there is an even better way to understand valuation. Narratives let you turn your view of Waste Management into a simple story that links your assumptions about future revenue, earnings and margins to a financial forecast, a fair value and a clear comparison with today’s price. All of this happens within the Simply Wall St Community page, where Narratives are refreshed when new information such as earnings or news arrives. One investor might build a higher value story closer to the US$277.0 analyst target by focusing on technology, sustainability projects and healthcare integration. Another might anchor nearer the US$198.0 target by focusing on regulatory risks, leverage and revenue volatility. You can then use those different fair values against the current share price to help decide whether the stock looks attractive, fully priced or stretched.

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.