Critical Review: Waste Management (WM) versus Casella Waste Systems (CWST)

Casella Waste Systems (NASDAQ: CWST) and Waste Management (NYSE:WM) are both industrial products companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, valuation and dividends.

Insider & Institutional Ownership

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81.2% of Casella Waste Systems shares are held by institutional investors. Comparatively, 76.8% of Waste Management shares are held by institutional investors. 11.5% of Casella Waste Systems shares are held by insiders. Comparatively, 0.3% of Waste Management shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Casella Waste Systems and Waste Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Casella Waste Systems -3.64% -58.61% 4.76%
Waste Management 13.45% 25.48% 6.77%

Risk and Volatility

Casella Waste Systems has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500. Comparatively, Waste Management has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Casella Waste Systems and Waste Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Casella Waste Systems 0 0 3 0 3.00
Waste Management 0 0 8 0 3.00

Casella Waste Systems presently has a consensus target price of $21.33, suggesting a potential downside of 11.37%. Waste Management has a consensus target price of $89.86, suggesting a potential upside of 8.05%. Given Waste Management’s higher probable upside, analysts plainly believe Waste Management is more favorable than Casella Waste Systems.

Dividends

Waste Management pays an annual dividend of $1.86 per share and has a dividend yield of 2.2%. Casella Waste Systems does not pay a dividend. Waste Management pays out 57.8% of its earnings in the form of a dividend. Waste Management has increased its dividend for 14 consecutive years.

Earnings and Valuation

This table compares Casella Waste Systems and Waste Management’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Casella Waste Systems $599.31 million 1.70 -$21.79 million $0.67 35.93
Waste Management $14.49 billion 2.49 $1.95 billion $3.22 25.83

Waste Management has higher revenue and earnings than Casella Waste Systems. Waste Management is trading at a lower price-to-earnings ratio than Casella Waste Systems, indicating that it is currently the more affordable of the two stocks.

Summary

Waste Management beats Casella Waste Systems on 11 of the 16 factors compared between the two stocks.

About Casella Waste Systems

Casella Waste Systems, Inc., together with its subsidiaries, operates as a vertically-integrated solid waste services company in the northeastern United States. The company operates through Eastern Region, Western Region, Recycling, and Other segments. It offers resource management services primarily in the areas of solid waste collection and disposal, transfer, recycling, and organics services to residential, commercial, municipal, and industrial customers. The company provides a range of non-hazardous solid waste services, including collections, transfer stations, material recovery facilities, and disposal facilities. It also processes and markets recyclable metals, aluminum, plastics, and paper and corrugated cardboard, as well as recyclables purchased from third-parties. In addition, the company is involved in commodity brokerage operations. As of January 31, 2018, it owned and/or operated 32 solid waste collection operations, 47 transfer stations, 18 recycling facilities, 9 Subtitle D landfills, 4 landfill gas-to-energy facilities, and 1 landfill permitted to accept construction and demolition materials. Casella Waste Systems, Inc. was founded in 1975 and is headquartered in Rutland, Vermont.

About Waste Management

Waste Management, Inc., through its subsidiaries, provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America. It provides collection services, including picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility (MRF), or disposal site; and owns, develops, and operates landfill gas-to-energy facilities in the United States, as well as owns and operates transfer stations. As of December 31, 2017, the company owned or operated 244 solid waste landfills; 5 secure hazardous waste landfills; 90 MRFs; and 305 transfer stations. It also provides materials processing and commodities recycling services; recycling brokerage services, such as managing the marketing of recyclable materials for third parties; and other strategic business solutions. In addition, the company offers construction and remediation services; services related with the disposal of fly ash, and residue generated from the combustion of coal and other fuel stocks; in-plant services comprising full-service waste management solutions and consulting services; and specialized disposal services for oil and gas exploration and production operations. Further, it portable self-storage and long distance moving services; fluorescent bulb and universal waste mail-back services through LampTracker program; portable restroom services under the Port-o-Let name; and street and parking lot sweeping services, as well as holds interests in oil and gas producing properties. The company was formerly known as USA Waste Services, Inc. and changed its name to Waste Management, Inc. in 1998. Waste Management, Inc. was incorporated in 1987 and is headquartered in Houston, Texas.

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