I do not own this stock of Waste Connections Inc (TSX-WCN, NYSE-WCN), but I used too. I first bought this stock in 2007 because TD Securities had a very favorable report on this stock and had it on its action buy lists. At that time, it was BFI Canada Income Fund. In 2010, I needed to buy something for Pension Account. I have this already and it is on TD Action Buy List. I sold when it became the target of a reverse takeover by an American company.
When I was updating my spreadsheet, I noticed Revenue has grown well, but Revenue per Share has not. For example, Revenue for the past 5 and 10 years has grown at 21.8% and 18.3% per year. Revenue per Share is down over the past 5 and 10 years by 11.2% and 2.1% per year. These are in US$. As a shareholder, the Revenue per Share is the important growth. Growth in outstanding shares over past 5 and 10 years is 37% and 20.9% per year. Revenue per Share declined and Outstanding Shares increased because of the merger of BFI and WCN.
The dividend yields are low with dividend growth good lately. It started to pay dividends in US$ in 2017. The current dividends yield low (below 2%) at 0.82%. The 5, 10 and historical dividend yields are also low at 0.85%, 1.05% and 1.25%. It used to be an income trust and when they changed to a corporation, they lowered their dividends. Also, on the transition to US$ dividends and the takeover, dividends were lowered slightly. They seem to back to a dividend growth company. The last increase was for 15.6% and it occurred this year.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 31% with 5 year coverage at 27%. The DPR for CFPS for 2019 is 12% with 5 year coverage at 11%. The DPR for Free Cash Flow for 2019 20% with 5 year coverage at 19%. Dividend Coverage Ratio for 2019 is 5.00 and for the past 5 year is 5.32.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2019 is 0.18 with a current one at 0.22. This is good and low. The Liquidity Ratio is low at 1.12 and better at 2.48 when you added cash flow after dividends. The Debt Ratio is good at 2.02. Leverage and Debt/Equity Ratios are good at 1.98 and 0.98 for 2019.
The Total Return per year is shown below for years of 5 to 18 to the end of 2019 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 16.26% | 20.49% | 19.52% | 0.97% |
| 2009 | 10 | 3.52% | 18.62% | 17.57% | 1.04% |
| 2004 | 15 | -0.17% | 10.05% | 8.66% | 1.39% |
| 2001 | 18 | 2.73% | 15.30% | 12.64% | 2.66% |
The Total Return per year is shown below for years of 5 to 17 to the end of 2019 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 13.66% | 17.75% | 16.87% | 0.88% |
| 2009 | 10 | 1.34% | 16.17% | 15.13% | 1.04% |
| 2004 | 15 | -0.68% | 9.82% | 8.29% | 1.54% |
| 2002 | 17 | 3.92% | 14.91% | 12.18% | 2.73% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 29.32, 33.50 and 37.68. The corresponding 10 year ratios are 16.04, 19.10 and 22.15. The corresponding historical ratios are 16.04, 19.65 and 25.67. The current P/E Ratio is 46.87 based on a stock price $122.34 and 2020 EPS estimate of $2.61 ($1.92 US$). This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I get a Graham Price of $44.99. The 10 year low, median, and high median Price/Graham Price Ratios are 1.03, 1.19 and 1.37. The current P/GP Ratio is 2.72 based on a stock price of $122.34. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.80. The current P/B Ratio is 3.56 based on a stock price of $90.21, Book Value of $6,682M and Book Value per Share of $25.35. The current ratio is 98% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.16. The current P/CF Ratio is 17.05 based on a stock price of $90.21, Cash Flow per Share estimate of $5.29 and Cash Flow of $1,395M. The current ratio is 177% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.25%. The current dividend yield is 0.82% based on dividends of $1.01 ($0.74 US$). The current ratio is 34% below the historical median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I get a 10 year median dividend yield of 1.02%. The current dividend yield is 0.82% based on dividends of $0.74 and a stock price of $90.21. The current ratio is 20% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 1.30. The current P/S Ratio is 4.48 based on 2020 Revenue estimate of $5,312M, Revenue per Share of $20.15 and a stock price of $90.21. The current ratio is 244% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably expensive. Both the historical and 10 year median dividend yield tests say this and it is confirmed by the P/S Ratio test. The other tests are showing the same results. I do not see any problems with any of the tests.
Is it a good company at a reasonable price? It would appear that the stock price is relatively expensive. Revenue per Share and Cash Flow per Share decreased a lot and number of shares increase a lot at the merger. Revenue per Share and CFPS have been increasing over the past 3 years. EPS has been increasing. One problem I see is the very low dividend yield. I do not buy companies with a yield below 1%. Since the stock is relatively expensive and the dividend yield very low, there are probably better companies to buy at this time.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (3), Hold (4) and Sell (1). The consensus would be a Buy. The 12 month stock price is $138.12 ($101.59 US$). This implies a total return of 13.72% with 12.90% from capital gains and 0.82% from dividends.
Analyst on Stock Chase mostly like this stock. Adam Othman Motley Fool thinks this is a recession resistant stock. A write on Simply Wall Street is unimpressed with the company’s ROCE. A writer on Simply Wall Street talks about insider selling. RBC analysts via Investing.com maintains a buy rating on this stock.
Waste Connections is the third- largest integrated provider of traditional solid waste and recycling services in the North America, operating 86 active landfills, 124 transfer stations, and 66 recycling operations. The firm serves residential, commercial, industrial, and energy end markets. Its web site is here Waste Connections Inc.
The last stock I wrote about was about was Lassonde Industries (TSX-LAS.A, OTC-LSDAF) ... learn more. The next stock I will write about will be Intertape Polymer Group Inc (TSX-ITP, OTC-ITPOF) ... learn more on Wednesday, June 17, 2020 around 5 pm. Tomorrow on my other blog I will write about Women Investors.... learn more on June 16, 2020 around 5 pm.
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