Don’t Buy Waste Management, This Stock Has Much More Upside
Garbage isn’t something you think about every day. You normally just toss stuff into the waste basket… or haul it to the nearest dumpster.
But, how often do you think about who picks this stuff up and where they take it?
Believe it or not, garbage is an incredibly profitable industry. According to a little back of the envelope math, the publicly traded garbage companies last year sucked in over $28.9 billion in revenue… then spit out over $2 billion in profits!
But that’s not what makes this industry really attractive…
What I like best about the Garbage industry is simple… Garbage isn’t going away. I don’t care how careful you are, you will generate some level of garbage. And don’t forget recycling too. Many of these companies see recycling as a way to further expand their business footprint.
Of course, many investors will be tempted to run out and scoop up shares of the biggest player in the space. Waste Management (WM) is a household name after all – and they sponsor a fun golf tournament here in Scottsdale too.
Waste Management currently trades for over $33 a share and has a market cap of just over $15 billion. However, their P/E ratio is over 16x… which puts them just over the market average.
But before you jump on that bandwagon, let me give you another idea.
Instead of rushing out and buying WM… take a close look at Casella Waste Systems (CWST).
Well for starters, they have a market cap of only $160 million, and the stock trades at just over $6.00 a share.
But that’s not all.
The company is also hugely undervalued. Remember how WM’s Price/Earnings ratio was just over 16x… well Casella trades at a 75% discount! CWST’s P/E ratio is a hair over 4x.
Buying Casella gives you about four times the earnings power of WM!
Now here’s where the story really gets exciting…
Projections show WM growing over the next five years at a steady 10.3%… not bad, but don’t forget this is a huge company. Growing at that rate might be a struggle.
Casella, on the other hand, is projected to grow at a 20% rate!
That’s twice as much growth over the same time period. Since Casella is a much smaller company, their growth rate is much more achievable. As a matter of fact, I wouldn’t be surprised to see an upside growth surprise at some point in their future.
And let me leave you with one final thought…
Casella is growing quickly and is very undervalued compared to the industry. That makes them a prime takeover target for a bigger company… like Waste Management. And remember, most buyouts come at a big premium to current stock prices.
Any way you slice it, I see more upside in CWST than WM.
Until next time,
– Brian WalkerSource: Penny Stock Research
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