• Wondering if Waste Management at US$231.43 is offering fair value or asking you to pay up for its quality? This article walks through the key numbers so you can judge the price with more confidence.
• The stock has returned 0.2% over the last 7 days and 6.0% year to date, with a 6.1% decline over the past month that contrasts with its 46.4% 3 year and 86.9% 5 year returns.
• Recent attention on Waste Management has focused on its role as a core player in essential services and how that fits into portfolios during different market conditions. Broader coverage has also highlighted investor interest in established, cash generative companies. This helps frame how the recent price moves might be viewed.
• Right now, Waste Management scores 2 out of 6 on our valuation checks. The next sections will compare common valuation approaches and then finish with a more complete way of thinking about what this price really means.

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 all those future dollars are worth in present terms.

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 stands at about $2.56b. Analysts and extrapolated estimates point to projected Free Cash Flow of around $5.08b in 2035, with a series of forecasts between 2026 and 2035 that are discounted back to today in the model.

Bringing all those future cash flows into present dollars gives an estimated intrinsic value of $242.26 per share. Compared with the current share price of $231.43, the DCF output suggests the stock is trading at about a 4.5% discount to this estimate, which is a relatively small gap.

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.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Waste Management.

Approach 2: Waste Management Price vs Earnings

For profitable companies like Waste Management, the P/E ratio is a useful way to relate what you pay per share to the earnings that support that price. Higher expected earnings growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually line up with a lower, more conservative multiple.

Waste Management currently trades on a P/E of 34.43x. That sits above the Commercial Services industry average P/E of 22.92x, but slightly below the peer group average of 35.89x. Simply Wall St also calculates a proprietary “Fair Ratio” of 30.23x for Waste Management, which reflects what the P/E might be given factors such as its earnings growth profile, industry, profit margins, market cap and company specific risks.

This Fair Ratio tends to be more tailored than a simple peer or industry comparison because it adjusts for differences in business quality and risk, rather than assuming all companies deserve similar multiples. With the current 34.43x P/E sitting above the 30.23x Fair Ratio, the shares screen as trading at a premium on this earnings based view.

Result: OVERVALUED

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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. Narratives bring your view of Waste Management together in one place by linking the company story, your forecast for revenue, earnings and margins, and your own fair value, then comparing that fair value to the current price to help guide your decisions.

On Simply Wall St, Narratives sit inside the Community page and are used by millions of investors. They update automatically when new information such as news, earnings or guidance is added, so your story and numbers stay aligned with what is happening.

For Waste Management, one investor might focus on adoption of technology, investments in sustainability and WM Healthcare Solutions integration and conclude a fair value closer to the higher analyst target of US$277.0. Another could worry more about tax credits, weather impacts, leverage and regulation and settle near the lower target of US$198.0. Narratives make these different views transparent and comparable in a simple, visual way.

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.

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Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.