Waste Connections Inc.

Thanks for all the well wishes. I am fine today. I am generally in good health because I exercise and walk a lot so I hope I stay that way.

Sound bite for Twitter and StockTwits is: In Waste Collection. This is considered to be an industrial services stock. It is in a business that will certainly go on in the future. It has been a profitable business. It has Buy ratings but I think it is expensive. Note that I go from Progressive Waste to Waste Connections in my analysis. See my spreadsheet on Waste Connections Inc.

I do not own this stock of Waste Connections Inc. (TSX-WCN, NYSE-WCN) but I used to own it as Progressive Waste Solutions. This big news, of course, is that there was a merger (or reverse takeover) between Waste Connections and Progressive Waste in the middle of 2016.

I first bought Progressive Waste in 2007 because TD Securities had a very favourable report on this stock and had it on it action buy lists. I had money because I had recently sold RIM. At that time it was an income fund. I sold my stake in this company in May 2016 just before the merger with Waste Connections. I find owning US companies a pain because you get dividends in US$ and you never know exactly what you will get.

This last time I reviewed this company it was called Progressive Waste Solutions Ltd (TSX-BIN, NYSE-BIN). The company merged with Waste Connections Inc. (TSX-WCN, NYSE-WCN). See the announcement by Waste Connections Inc. My spreadsheet and my review are going from Progressive Waste to Waste Connections.

I had done well on this stock. Over the 8.5 years I own Progressive Waste I earned 10.71% per year with 8.30% from capital gains and 2.41% from dividends. If I had kept my shares I would have earned a capital gain of 12.32% per year. Dividends are lower with the merger, but say I got 2% in dividends, that would be a total return of 14.32% per year over 9.6 years. However, I would have ended up with an odd number of shares as Progressive Waste shareholders got .4815 shares for each share owned.

For Canadians dividends have been decreased by around 30% in 2016 in preparation for the merger. Under Progressive Waste, dividends in the past have gone down as well as up. As far as I can see Progressive Waste went public in 2002 as BFI Canada Income Fund and paid dividends since 2002, which is for 15 years.

According to their site, Waste Connections started paying dividends at the end of 2010. They seemed to have always paid a lower yield dividend with a 7 year median yield of 0.8% on the stock's closing price, compared to Progressive Waste which has a 2.38% median yield on the stock's closing price.

The dividend growth on Waste Connection for the past 5 years was at 14.3% per year. The 5 year dividend growth for Progressive Waste was 5.7% before the decrease to merge with Waste Connection. However, I do not like stocks that have yields below 1% because it takes so long to get a really good yield on your original cost of your stock.

For the past 5 and 10 years with dividends included, Progressive Waste total return is at 22.62% and 9.05% per year. The total return for the past 5 and 10 years for Waste Connection is at 19.44% and 6.54% per year. For the past 5 and 10 years the capital gains for Progressive Waste was at 20.54% and 6.35% per year.

For the past 5 and 10 years the capital gains for Waste Connection was 18.85% and 6.22% per year. So, the total return and the capital gains were slightly higher for Progressive Waste than for Waste Connection. Going forward you can expect the company to probably behave as Waste Connections did.

After the merger in 2016, debt ratios seem better. The Liquidity Ratio for 2016 is 1.20. Prior under Progressive Waste the 5 year median Liquidity Ratio was 1.00 and was just 0.92 in 2015. After the merger in 2016 the Debt Ratio for 2016 is 2.02. Under Progressive Waste the 5 year median was 1.58 and the one for 2015 was 1.53.

The 5 year low, median and high median Price/Earnings per Share Ratio for Progressive Waste were 19.54, 23.66 and 27.77. The 10 year values were 19.31, 52.21 and 28.11. The historical values are 22.26, 27.79 and 33.32. The current P/E Ratio is 42.11 based on a stock price of $130.80 and 2017 EPS estimate of $3.11 CDN$. I have no figures for Waste Connection, but in any case a P/E Ratio of 42.11 is high. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $55.09 CDN$. The 10 year low, median and high median Price/Graham Price Ratios are 1.29, 1.48 and 1.74. The current P/GP Ratio is 2.37 based on a stock price of $130.80 CDN$. This stock price testing suggests that the stock price is relatively expensive. I do not have values for Waste Connection, but on an absolute basis a P/GP Ratio of 2.37 is very high.

I get a 10 year median Price/Book Value per Share of $2.01. The current P/B Ratio is 3.01 based on BVPS of $43.43 CDN$ and a stock price of $130.80 CDN$. The current P/B Ratio is some 50% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive. I do not have values for Waste Connection, but on an absolute basis a P.B Ratio of 3.01 is high.

I get a P/S Ratio of 1.44 US$. The current P/S Ratio is 3.77 US$ based on Revenue of $4518M US$, Revenue per Share of $25.74 US$ and a stock price of $96.92 US$. The current P/S Ratio is some 161% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive. You will get similar results in CDN$. I do not have values for Waste Connection, but on an absolute basis a P/B Ratio of 3.77 is high.

There does not seem to be many analysts following this stock. There are 2 analysts that I can find and they both give the stock a Buy Recommendations with a consensus recommendation of a Buy. The 12 months consensus stock price is $96.50 US$. This implies a total return of 0.31% with a capital loss of 0.43% and dividends of 0.74%. You have to wonder the why of the Buy recommendations. The answer could be that the stock has recently had great upward momentum.

Zacks Equity Research showing on NASDAQ shows that they rank this stock as a Buy and feel that they have further room for growth of 15.8% per year over the long term. Charlotte Bryant on Chaffey Breeze says that Royal Bank lifted their 12 month stock price of $125.00 CDN$ and give the stock an Outperform (Buy) Rating. There are no 2017 comments on this stock, but in the past analysts on Stock Chase thought this was a good stock in a good business.

Waste Connections is an integrated solid waste services company that provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S. and Canada. Its web site is here Waste Connections Inc.

The last stock I wrote about was about was Goeasy Ltd (TSX-GSY, OTC-EHMEF)... learn more. The next stock I will write about will be IGM Financial Inc. (TSX-IGM, OTC-IGIFF)... learn more on Wednesday, June 7, 2017 around 5 pm. Today on my other blog I will write about Dividend Stocks June 2017... learn more on Tuesday, June 6, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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