I do not own this stock of Waste Connections Inc (TSX-WCN, NYSE-WCN), but I used to. I first bought this stock in 2007 because TD Securities had a very favorable report on this stock and had it on their action buy list. At that time, it was BFI Canada Income Fund. I sold in 2016 when it because the target of a reverse takeover by an American company.
When I was updating my spreadsheet, I noticed that although the Revenue is strongly going up, Revenue per share is going down. The Revenue growth for the past 5 and 10 years is 23% and 14 % per year. However, the Revenue per Share growth over the past 5 and 10 years has declined by 3.36% and 1.67% per year. This is because the company is issuing lots of shares. Outstanding shares are up by 27% per year over the past 5 years and 16% per year over the past 10 years. There is the same problem with Cash Flow. The EPS is low in 2020 because of write offs.
The dividend yields are low with dividend growth good. The current dividend yield is low (less than 2%) at just 0.68%. The 5, 10 and historical dividend yields are also low at 0.80%, 1.00% and 1.20%. The dividend growth is good (8% to 14% ranges) at 19% per year over the past 5 years. The last increase was in 2020 and it was for 10.8%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 97% with 5 year coverage at 37%. The DPR for EPS for 2021 is expected to be around 30%. The DPR for CFPS for 2020 is 14% with 5 year coverage at 12%. The DPR for Free Cash Flow for 2020 is 27% with 5 year coverage at 21%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.18. The Liquidity Ratio for 2020 is low at 1.37 but if you add in cash flow after dividends it is good at 2.54. The Debt Ratio for 2020 is 1.96. The Leverage and Debt/Equity Ratios for 2020 are 2.04 and 1.04.
The Total Return per year is shown below for years of 5 to 19 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 17.07% | 24.80% | 23.66% | 1.14% |
| 2010 | 10 | 11.25% | 15.47% | 14.57% | 0.90% |
| 2005 | 15 | -0.81% | 9.57% | 8.41% | 1.16% |
| 2001 | 19 | 3.22% | 15.12% | 12.53% | 2.59% |
The Total Return per year is shown below for years of 5 to 18 to the end of 2020 in US$. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 19.05% | 26.93% | 25.76% | 1.17% |
| 2010 | 10 | 8.56% | 12.62% | 11.79% | 0.83% |
| 2005 | 15 | -1.39% | 9.04% | 7.81% | 1.23% |
| 2002 | 18 | 4.47% | 14.93% | 12.41% | 2.52% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 32.70, 40.90 and 46.22. The corresponding 10 year ratios are 20.70, 23.97 and 27.24. The corresponding historical ratios are 16.21, 19.81 and 25.76. The current P/E Ratio is 44.70 based on a stock price of $147.16 and EPS estimate for 2021 of $3.29 ($2.71 US$). This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a Graham Price of $48.74. The 10 year low, median, and high median Price/Graham Price Ratios are 1.32, 1.58 and 1.81. The current P/GP Ratio is 3.02 based on a stock price of $147.16. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 2.24. The current P/B Ratio is 4.58 based on a Book Value of $6,938M, Book Value per Share of $26.40 and a stock price of $120.99. The current ratio is 105% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.21. The current P/CF Ratio is 21.01 based on Cash Flow per Share estimate for 2021 of $5.76, Cash Flow of $1,514M and a stock price of $120.99. The current ratio is 106% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.19%. The current dividend yield is 0.68% based on dividends of $1.00 ($0.82 US$) and a stock price of $147.16. The current yield is 43% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median dividend yield of 0.96%. The current dividend yield is 0.68% based on dividends of $1.00 ($0.82 US$) and a stock price of $147.16. The current yield is 29% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.39. The current P/S Ratio is 5.33 based on Revenue estimate for 2021 of $5,966M, Revenue per Share of $22.70 and a stock price of $120.99. The current ratio is 123% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is relatively expensive. The dividend yield test is showing the stock price as expensive and this is confirmed by the P/S Ratio test. In fact, all my tests are showing the stock price as expensive.
Is it a good company at a reasonable price? It would seem that the current stock price is on the expensive side. Investors have done well with this company. I worry about the dilution of shares because the company has issued so many over the past 5 and 10 years. As a Canadian I do not like to have too many companies paying dividends in US$, because of fluctuating dividends. I do not regret selling my shares.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (6), Hold (1) and Sell (1). The consensus would be a Buy. The 12 month stock price is 157.52 ($129.67 US$). This implies a total return of 7.72%, with 0.68% from dividends and 7.04% from capital gains.
Analysts on Stock Chase like this stock and it is the top pick for some. Rajiv Nanjapla on Motley Fool likes the EBITDA margin of this company. The executive summary on Simply Wall Street gives this stock 2 stars out of 5 and lists 4 risks. A writer on Simply Wall Street says this stock’s fair value is $92.66 US$. A writer on Simply Wall Street thinks that this company can handle it debt.
Waste Connections is the third- largest integrated provider of traditional solid waste and recycling services in the North America. The firm serves residential, commercial, industrial, and energy end markets. Waste Connections entered the Canadian market with its 2016 merger with Progressive Waste. Its web site is here Waste Connections Inc.
The last stock I wrote about was about was Lassonde Industries Inc (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 Monday, June 21, 2021 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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