Republic Services Inc Valuation – March 2019 $RSG

Company Profile (excerpt from Reuters): Republic Services, Inc., incorporated on December 20, 1996, is a provider of non-hazardous solid waste collection, transfer, disposal, recycling and energy services. The Company’s segments include Group 1, Group 2 and Corporate entities. Its Group 1 and Group 2 segments provide integrated waste management services. Group 1 consists of geographic areas located in the western and portions of the mid-western United States. Group 2 consists of geographic areas located in Texas, the southeastern and portions of the mid-western United States, and the eastern seaboard of the United States. As of December 31, 2016, it operated in 39 states and Puerto Rico through 333 collection operations, 204 transfer stations, 192 active landfills, 64 recycling centers, seven treatment, recovery and disposal facilities, and 10 salt water disposal wells. As of December 31, 2016, it also operated 71 landfill gas and renewable energy projects and had post-closure responsibility for 124 closed landfills.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RSG – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,307,916,611 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.58 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 129.35% Pass
6. Moderate PEmg Ratio PEmg < 20 25.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.23 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.58 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.63 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.05
MG Growth Estimate 11.13%
MG Value $93.88
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $44.26
MG Value based on 0% Growth $25.95
Market Implied Growth Rate 8.64%
Current Price $78.69
% of Intrinsic Value 83.82%

Republic Services, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.75 in 2015 to an estimated $3.05 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Republic Services, Inc. revealed the company was trading above its Graham Number of $42.27. The company pays a dividend of $1.44 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 25.78, which was below the industry average of 47.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-37.22.

Republic Services, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$37.22
Graham Number $42.27
PEmg 25.78
Current Ratio 0.58
PB Ratio 3.23
Current Dividend $1.44
Dividend Yield 1.83%
Number of Consecutive Years of Dividend Growth 17

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,564,400,000
Total Current Liabilities $2,718,600,000
Long-Term Debt $7,646,800,000
Total Assets $21,617,000,000
Intangible Assets $11,506,600,000
Total Liabilities $13,687,500,000
Shares Outstanding (Diluted Average) 325,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.23
Dec2018 $3.16
Dec2017 $3.77
Dec2016 $1.78
Dec2015 $2.13
Dec2014 $1.53
Dec2013 $1.62
Dec2012 $1.55
Dec2011 $1.56
Dec2010 $1.32
Dec2009 $1.30
Dec2008 $0.37
Dec2007 $1.51
Dec2006 $1.39
Dec2005 $1.20
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.96
Dec2001 $0.49
Dec2000 $0.84
Dec1999 $0.76

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.05
Dec2018 $2.80
Dec2017 $2.47
Dec2016 $1.79
Dec2015 $1.75
Dec2014 $1.55
Dec2013 $1.53
Dec2012 $1.39
Dec2011 $1.28
Dec2010 $1.15
Dec2009 $1.10
Dec2008 $1.04
Dec2007 $1.31
Dec2006 $1.17
Dec2005 $1.00
Dec2004 $0.88
Dec2003 $0.78

Recommended Reading:

Other ModernGraham posts about the company

Republic Services Inc Valuation – May 2018 $RSG
Republic Services Inc Valuation – January 2017 $RSG
Republic Services Inc. Analysis – September 2015 Update $RSG
20 Companies to Research This Week – 9/6/14
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Other ModernGraham posts about related companies

Waste Management Inc Valuation – February 2019 $WM
Clean Harbors Inc Valuation – July 2018 $CLH
Stericycle Inc Valuation – May 2018 $SRCL
Republic Services Inc Valuation – May 2018 $RSG
Waste Management Inc Valuation – April 2018 $WM
US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Republic Services Inc Valuation – May 2018 $RSG

Company Profile (excerpt from Reuters): Republic Services, Inc., incorporated on December 20, 1996, is a provider of non-hazardous solid waste collection, transfer, disposal, recycling and energy services. The Company’s segments include Group 1, Group 2 and Corporate entities. Its Group 1 and Group 2 segments provide integrated waste management services. Group 1 consists of geographic areas located in the western and portions of the mid-western United States. Group 2 consists of geographic areas located in Texas, the southeastern and portions of the mid-western United States, and the eastern seaboard of the United States. As of December 31, 2016, it operated in 39 states and Puerto Rico through 333 collection operations, 204 transfer stations, 192 active landfills, 64 recycling centers, seven treatment, recovery and disposal facilities, and 10 salt water disposal wells. As of December 31, 2016, it also operated 71 landfill gas and renewable energy projects and had post-closure responsibility for 124 closed landfills.

RSG Chart

RSG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RSG – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,997,036,526 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 103.11% Pass
6. Moderate PEmg Ratio PEmg < 20 24.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.86 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.53 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.22 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 11.43%
MG Value $85.52
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $39.55
MG Value based on 0% Growth $23.18
Market Implied Growth Rate 8.22%
Current Price $68.04
% of Intrinsic Value 79.56%

Republic Services, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.55 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 8.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Republic Services, Inc. revealed the company was trading above its Graham Number of $39.84. The company pays a dividend of $1.33 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 24.95, which was below the industry average of 51.04, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-35.65.

Republic Services, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$35.65
Graham Number $39.84
PEmg 24.95
Current Ratio 0.53
PB Ratio 2.86
Current Dividend $1.33
Dividend Yield 1.95%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,354,000,000
Total Current Liabilities $2,560,200,000
Long-Term Debt $7,499,700,000
Total Assets $21,108,700,000
Intangible Assets $11,450,400,000
Total Liabilities $13,196,900,000
Shares Outstanding (Diluted Average) 332,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.94
Dec2017 $3.77
Dec2016 $1.78
Dec2015 $2.13
Dec2014 $1.53
Dec2013 $1.62
Dec2012 $1.55
Dec2011 $1.56
Dec2010 $1.32
Dec2009 $1.30
Dec2008 $0.37
Dec2007 $1.51
Dec2006 $1.39
Dec2005 $1.20
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.96
Dec2001 $0.49
Dec2000 $0.84
Dec1999 $0.76
Dec1998 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2017 $2.47
Dec2016 $1.79
Dec2015 $1.75
Dec2014 $1.55
Dec2013 $1.53
Dec2012 $1.39
Dec2011 $1.28
Dec2010 $1.15
Dec2009 $1.10
Dec2008 $1.04
Dec2007 $1.31
Dec2006 $1.17
Dec2005 $1.00
Dec2004 $0.88
Dec2003 $0.78
Dec2002 $0.77

Recommended Reading:

Other ModernGraham posts about the company

Republic Services Inc Valuation – January 2017 $RSG
Republic Services Inc. Analysis – September 2015 Update $RSG
20 Companies to Research This Week – 9/6/14
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Other ModernGraham posts about related companies

Waste Management Inc Valuation – April 2018 $WM
US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Republic Services Inc Valuation – January 2017 $RSG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Republic Services Inc (RSG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Republic Services, Inc. is a provider of non-hazardous solid waste collection, transfer, disposal, recycling and energy services in the United States. The Company operates through three segments: East, Central and West. The Company operates in over 40 states and Puerto Rico through approximately 340 collection operations, over 200 transfer stations, over 190 active landfills, approximately 70 recycling centers, approximately 10 treatment, recovery and disposal facilities, and over 10 salt water disposal wells. It also operates approximately 70 landfill gas and renewable energy projects. It has post-closure responsibility for approximately 130 closed landfills. The Company provides residential, small-container commercial and large-container industrial solid waste collection services. Its residential collection business involves the curbside collection of waste for transport to transfer stations, or directly to landfills or recycling centers.

RSG Chart

RSG data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of RSG – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,520,485,416 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 70.44% Pass
6. Moderate PEmg Ratio PEmg < 20 32.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.59 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -14.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.78
MG Growth Estimate 4.14%
MG Value $29.88
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $25.81
MG Value based on 0% Growth $15.13
Market Implied Growth Rate 11.91%
Current Price $57.54
% of Intrinsic Value 192.55%

Republic Services, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.39 in 2012 to an estimated $1.78 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Republic Services, Inc. revealed the company was trading above its Graham Number of $29.79. The company pays a dividend of $1.22 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.33, which was above the industry average of 29.32. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.07.

Republic Services, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.07
Graham Number $29.79
PEmg 32.33
Current Ratio 0.72
PB Ratio 2.59
Current Dividend $1.22
Dividend Yield 2.12%
Number of Consecutive Years of Dividend Growth 14

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $1,301,600,000
Total Current Liabilities $1,817,900,000
Long-Term Debt $7,739,600,000
Total Assets $20,661,700,000
Intangible Assets $11,364,500,000
Total Liabilities $13,022,500,000
Shares Outstanding (Diluted Average) 344,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.76
Dec2015 $2.13
Dec2014 $1.53
Dec2013 $1.62
Dec2012 $1.55
Dec2011 $1.56
Dec2010 $1.32
Dec2009 $1.30
Dec2008 $0.37
Dec2007 $1.51
Dec2006 $1.39
Dec2005 $1.20
Dec2004 $1.08
Dec2003 $0.78
Dec2002 $0.96
Dec2001 $0.49
Dec2000 $0.84
Dec1999 $0.76
Dec1998 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.78
Dec2015 $1.75
Dec2014 $1.55
Dec2013 $1.53
Dec2012 $1.39
Dec2011 $1.28
Dec2010 $1.15
Dec2009 $1.10
Dec2008 $1.04
Dec2007 $1.31
Dec2006 $1.17
Dec2005 $1.00
Dec2004 $0.88
Dec2003 $0.78
Dec2002 $0.77
Dec2001 $0.64
Dec2000 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Republic Services Inc. Analysis – September 2015 Update $RSG
20 Companies to Research This Week – 9/6/14
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Other ModernGraham posts about related companies

Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Republic Services Inc. Analysis – September 2015 Update $RSG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Republic Services Inc. (RSG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Republic Services, Inc. is a provider of services in the domestic non-hazardous solid waste services industry. The Company provides non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers. The Company operates three geographic operating regions that are also its segments: East, Central and West. Each region is organized into several areas and each area contains multiple business units or operating locations. The Company has approximately 340 collection operations, owned or operated 198 transfer stations, 189 active solid waste landfills and 60 recycling centers. It also operates approximately 72 landfill gas and renewable energy projects. The Company operates in 39 states and Puerto Rico. The Company provides collection, transfer, recycling and landfill services in all its regions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of RSG – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.72
MG Growth Estimate 5.12%
MG Value $32.21
Opinion Overvalued
MG Value based on 3% Growth $24.93
MG Value based on 0% Growth $14.61
Market Implied Growth Rate 7.45%
Current Price $40.23
% of Intrinsic Value 124.90%

Republic Services Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to an estimated $1.72 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 7.45% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Republic Services Inc. (RSG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

RSG Charts September 2015

Net Current Asset Value (NCAV) -$32.85
Graham Number $31.74
PEmg 23.40
Current Ratio 0.75
PB Ratio 1.82
Dividend Yield 2.78%
Number of Consecutive Years of Dividend Growth 13

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $1,340,900,000
Total Current Liabilities $1,788,200,000
Long-Term Debt $7,547,500,000
Total Assets $20,666,600,000
Intangible Assets $11,375,100,000
Total Liabilities $12,904,100,000
Shares Outstanding (Diluted Average) 352,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.03
Dec14 $1.53
Dec13 $1.62
Dec12 $1.55
Dec11 $1.56
Dec10 $1.32
Dec09 $1.30
Dec08 $0.37
Dec07 $1.51
Dec06 $1.39
Dec05 $1.20
Dec04 $1.08
Dec03 $0.78
Dec02 $0.96
Dec01 $0.49
Dec00 $0.84
Dec99 $0.76
Dec98 $0.75

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.72
Dec14 $1.55
Dec13 $1.53
Dec12 $1.39
Dec11 $1.28
Dec10 $1.15
Dec09 $1.10
Dec08 $1.04
Dec07 $1.31
Dec06 $1.17
Dec05 $1.00
Dec04 $0.88
Dec03 $0.78
Dec02 $0.77
Dec01 $0.64
Dec00 $0.63
Dec99 $0.45

Recommended Reading:

Other ModernGraham posts about the company

20 Companies to Research This Week – 9/6/14
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Other ModernGraham posts about related companies

Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to read our full disclaimer.

 

Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

220px-Republic_Waste_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Republic Services Inc. (RSG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Republic Services, Inc. (Republic) is a provider of services in the domestic non-hazardous solid waste industry. Republic provides non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 334 collection operations in 39 states and Puerto Rico. The Company owns or operates 194 transfer stations, 191 active solid waste landfills and 74 materials recovery facilities. It also operates 69 landfill gas and renewable energy projects. The Company operates in four geographical segments: Eastern, Midwestern, Southern and Western. Its residential collection operations involve the curbside collection of refuse from small containers into collection vehicles for transport to transfer stations or directly to landfills. Its commercial and industrial collection operations supply the customers with waste containers of varying sizes.
RSG Chart

RSG data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $39.11
MG Value $37.12
MG Opinion Fairly Valued
Value Based on 3% Growth $24.33
Value Based on 0% Growth $14.26
Market Implied Growth Rate 7.40%
Net Current Asset Value (NCAV) -$30.37
PEmg 23.31
Current Ratio 0.72
PB Ratio 1.77

Balance Sheet – 6/30/2014

Current Assets $1,225,100,000
Current Liabilities $1,705,500,000
Total Debt $7,042,100,000
Total Assets $19,876,000,000
Intangible Assets $11,044,300,000
Total Liabilities $12,022,800,000
Outstanding Shares 355,500,000

Earnings Per Share

2014 (estimate) $1.92
2013 $1.62
2012 $1.55
2011 $1.56
2010 $1.32
2009 $1.30
2008 $0.37
2007 $1.51
2006 $1.38
2005 $1.17
2004 $1.02

Earnings Per Share – ModernGraham

2014 (estimate) $1.68
2013 $1.53
2012 $1.39
2011 $1.28
2010 $1.15
2009 $1.10

Dividend History
RSG Dividend Chart

RSG Dividend data by YCharts

Conclusion:

Republic Services is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor has concerns with the level of earnings growth over the last ten years, the low current ratio, and the high PEmg ratio.  The Enterprising Investor is concerned with the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.15 in 2010 to an estimated $1.68 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 7.40% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Republic Services Inc. (RSG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Republic Services Inc. (RSG) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

 

Waste Management Inc Valuation – February 2019 $WM

Company Profile (excerpt from Reuters): Waste Management, Inc. (WM), incorporated on April 28, 1995, is a holding company. The Company, through its subsidiaries, is a provider of waste management environmental services. The Company’s segments include Solid Waste and Other. The Company’s Solid Waste segment includes its solid waste business. The Other segment includes its Strategic Business Solutions (WMSBS) organization; its landfill gas-to-energy operations and third-party subcontract and administration services managed by its Energy and Environmental Services and WM Renewable Energy organizations; its recycling brokerage services, and its service offerings and solutions, such as portable self-storage and long distance moving services, fluorescent lamp recycling and interests it holds in oil and gas producing properties.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WM – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $42,195,563,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.87 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 87.89% Pass
6. Moderate PEmg Ratio PEmg < 20 28.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.83 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.87 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -24.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.54
MG Growth Estimate 15.00%
MG Value $136.11
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $51.26
MG Value based on 0% Growth $30.05
Market Implied Growth Rate 9.75%
Current Price $98.99
% of Intrinsic Value 72.73%

Waste Management, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.74 in 2014 to an estimated $3.54 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Waste Management, Inc. revealed the company was trading above its Graham Number of $36.53. The company pays a dividend of $1.7 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 28, which was below the industry average of 42.59, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-31.74.

Waste Management, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$31.74
Graham Number $36.53
PEmg 28.00
Current Ratio 0.87
PB Ratio 6.83
Current Dividend $1.70
Dividend Yield 1.72%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,675,000,000
Total Current Liabilities $3,070,000,000
Long-Term Debt $9,569,000,000
Total Assets $22,591,000,000
Intangible Assets $6,944,000,000
Total Liabilities $16,350,000,000
Shares Outstanding (Diluted Average) 430,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.27
Dec2017 $4.41
Dec2016 $2.65
Dec2015 $1.65
Dec2014 $2.79
Dec2013 $0.21
Dec2012 $1.76
Dec2011 $2.04
Dec2010 $1.98
Dec2009 $2.01
Dec2008 $2.19
Dec2007 $2.23
Dec2006 $2.10
Dec2005 $2.09
Dec2004 $1.61
Dec2003 $1.06
Dec2002 $1.33
Dec2001 $0.80
Dec2000 -$0.16
Dec1999 -$0.65
Dec1998 -$1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.54
Dec2017 $2.89
Dec2016 $2.03
Dec2015 $1.71
Dec2014 $1.74
Dec2013 $1.35
Dec2012 $1.94
Dec2011 $2.05
Dec2010 $2.07
Dec2009 $2.12
Dec2008 $2.13
Dec2007 $2.01
Dec2006 $1.81
Dec2005 $1.57
Dec2004 $1.18
Dec2003 $0.80
Dec2002 $0.45

Recommended Reading:

Other ModernGraham posts about the company

Waste Management Inc Valuation – April 2018 $WM
Waste Management Inc Valuation – August 2016 $WM
5 Speculative and Overvalued Companies to Avoid – July 2015
Waste Management Inc. Analysis – 2015 Update $WM

Other ModernGraham posts about related companies

Clean Harbors Inc Valuation – July 2018 $CLH
Stericycle Inc Valuation – May 2018 $SRCL
Republic Services Inc Valuation – May 2018 $RSG
Waste Management Inc Valuation – April 2018 $WM
US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Clean Harbors Inc Valuation – July 2018 $CLH

Company Profile (excerpt from Reuters): Clean Harbors, Inc., incorporated on February 27, 1987, is a provider of environmental, energy and industrial services throughout North America. The Company is also a re-refiner and recycler of used oil in the world and a provider of parts cleaning and related environmental services to commercial, industrial and automotive customers in North America. The Company operates in six segments: Technical Services, Industrial Services, Field Services, Safety-Kleen, Oil and Gas Field Services, and Lodging Services. The Company is also a service provider in the recovery and decontamination of pollutants. The Company provides services to protect the ozone layer from the effects of chlorofluorocarbons (CFCs). It also provides hydro excavation services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLH – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,149,973,931 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -70.33% Fail
6. Moderate PEmg Ratio PEmg < 20 94.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.78 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.60
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $8.67
MG Value based on 0% Growth $5.08
Market Implied Growth Rate 42.87%
Current Price $56.35
% of Intrinsic Value N/A

Clean Harbors Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.23 in 2014 to an estimated $0.6 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 42.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Clean Harbors Inc revealed the company was trading above its Graham Number of $16.71. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 94.23, which was above the industry average of 57.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-25.85.

Clean Harbors Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$25.85
Graham Number $16.71
PEmg 94.23
Current Ratio 2.06
PB Ratio 2.78
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,079,822,000
Total Current Liabilities $524,684,000
Long-Term Debt $1,625,259,000
Total Assets $3,684,816,000
Intangible Assets $957,340,000
Total Liabilities $2,539,290,000
Shares Outstanding (Diluted Average) 56,457,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.59
Dec2017 $1.76
Dec2016 -$0.69
Dec2015 $0.76
Dec2014 -$0.47
Dec2013 $1.57
Dec2012 $2.40
Dec2011 $2.39
Dec2010 $2.47
Dec2009 $0.74
Dec2008 $1.26
Dec2007 $1.07
Dec2006 $1.13
Dec2005 $0.73
Dec2004 -$0.33
Dec2003 -$0.76
Dec2002 -$1.21
Dec2001 $0.20
Dec2000 $0.32
Dec1999 -$0.13
Dec1998 -$0.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.60
Dec2017 $0.60
Dec2016 $0.25
Dec2015 $0.92
Dec2014 $1.23
Dec2013 $2.02
Dec2012 $2.11
Dec2011 $1.84
Dec2010 $1.49
Dec2009 $0.99
Dec2008 $1.00
Dec2007 $0.71
Dec2006 $0.32
Dec2005 -$0.15
Dec2004 -$0.51
Dec2003 -$0.50
Dec2002 -$0.32

Recommended Reading:

Other ModernGraham posts about the company

Clean Harbors Inc Valuation – Initial Coverage $CLH

Other ModernGraham posts about related companies

Stericycle Inc Valuation – May 2018 $SRCL
Republic Services Inc Valuation – May 2018 $RSG
Waste Management Inc Valuation – April 2018 $WM
US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Stericycle Inc Valuation – May 2018 $SRCL

Company Profile (excerpt from Reuters): Stericycle, Inc., incorporated on March 21, 1989, is a business-to-business services provider. The Company focuses on regulated and compliance solutions for healthcare, retail, and commercial businesses. The Company’s segments include Domestic and Canada Regulated Waste and Compliance Services (RCS), Domestic Communication and Related Services (CRS), International RCS and All other. The Domestic and Canada RCS and International RCS segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through its Steri-Safe and Clinical Services programs, and other regulatory compliance services. The Domestic CRS segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns and quality audits.

SRCL Chart

SRCL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRCL – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,461,921,199 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.81 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -3.94% Fail
6. Moderate PEmg Ratio PEmg < 20 24.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.86 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.81 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.66 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.63
MG Growth Estimate -3.21%
MG Value $5.49
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.15
MG Value based on 0% Growth $22.37
Market Implied Growth Rate 7.88%
Current Price $63.83
% of Intrinsic Value 1161.96%

Stericycle Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.35 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Stericycle Inc revealed the company was trading above its Graham Number of $58.44. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.26, which was below the industry average of 51.04, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-38.05.

Stericycle Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$38.05
Graham Number $58.44
PEmg 24.26
Current Ratio 0.81
PB Ratio 1.86
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $810,600,000
Total Current Liabilities $999,900,000
Long-Term Debt $2,586,200,000
Total Assets $7,015,700,000
Intangible Assets $5,396,400,000
Total Liabilities $4,075,700,000
Shares Outstanding (Diluted Average) 85,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Dec2017 $0.27
Dec2016 $2.08
Dec2015 $2.98
Dec2014 $3.79
Dec2013 $3.56
Dec2012 $3.08
Dec2011 $2.69
Dec2010 $2.39
Dec2009 $2.03
Dec2008 $1.68
Dec2007 $1.32
Dec2006 $1.16
Dec2005 $0.74
Dec2004 $0.85
Dec2003 $0.72
Dec2002 $0.51
Dec2001 $0.18
Dec2000 $0.18
Dec1999 $0.23
Dec1998 $0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.63
Dec2017 $1.98
Dec2016 $2.93
Dec2015 $3.31
Dec2014 $3.35
Dec2013 $3.00
Dec2012 $2.60
Dec2011 $2.25
Dec2010 $1.93
Dec2009 $1.59
Dec2008 $1.30
Dec2007 $1.06
Dec2006 $0.88
Dec2005 $0.69
Dec2004 $0.61
Dec2003 $0.45
Dec2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Stericycle Inc Valuation – February 2017 $SRCL
Stericycle Inc. Analysis – October 2015 Update $SRCL
14 Companies in the Spotlight This Week – 10/18/14
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL

Other ModernGraham posts about related companies

Republic Services Inc Valuation – May 2018 $RSG
Waste Management Inc Valuation – April 2018 $WM
US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Waste Management Inc Valuation – April 2018 $WM

Company Profile (excerpt from Reuters): Waste Management, Inc. (WM), incorporated on April 28, 1995, is a holding company. The Company, through its subsidiaries, is a provider of waste management environmental services. The Company’s segments include Solid Waste and Other. The Company’s Solid Waste segment includes its solid waste business. The Other segment includes its Strategic Business Solutions (WMSBS) organization; its landfill gas-to-energy operations and third-party subcontract and administration services managed by its Energy and Environmental Services and WM Renewable Energy organizations; its recycling brokerage services, and its service offerings and solutions, such as portable self-storage and long distance moving services, fluorescent lamp recycling and interests it holds in oil and gas producing properties.

WM Chart

WM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WM – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,808,027,742 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.80 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 83.42% Pass
6. Moderate PEmg Ratio PEmg < 20 24.45 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.13 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.80 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.72 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate 14.67%
MG Value $130.35
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $49.96
MG Value based on 0% Growth $29.29
Market Implied Growth Rate 7.98%
Current Price $84.25
% of Intrinsic Value 64.63%

Waste Management, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.74 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Waste Management, Inc. revealed the company was trading above its Graham Number of $35.36. The company pays a dividend of $1.7 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 24.45, which was below the industry average of 56.58, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.11.

Waste Management, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$30.11
Graham Number $35.36
PEmg 24.45
Current Ratio 0.80
PB Ratio 6.13
Current Dividend $1.70
Dividend Yield 2.02%
Number of Consecutive Years of Dividend Growth 14

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,624,000,000
Total Current Liabilities $3,262,000,000
Long-Term Debt $8,752,000,000
Total Assets $21,829,000,000
Intangible Assets $6,794,000,000
Total Liabilities $15,810,000,000
Shares Outstanding (Diluted Average) 437,939,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2017 $4.41
Dec2016 $2.65
Dec2015 $1.65
Dec2014 $2.79
Dec2013 $0.21
Dec2012 $1.76
Dec2011 $2.04
Dec2010 $1.98
Dec2009 $2.01
Dec2008 $2.19
Dec2007 $2.23
Dec2006 $2.10
Dec2005 $2.09
Dec2004 $1.61
Dec2003 $1.06
Dec2002 $1.33
Dec2001 $0.80
Dec2000 -$0.16
Dec1999 -$0.65
Dec1998 -$1.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $2.89
Dec2016 $2.03
Dec2015 $1.71
Dec2014 $1.74
Dec2013 $1.35
Dec2012 $1.94
Dec2011 $2.05
Dec2010 $2.07
Dec2009 $2.12
Dec2008 $2.13
Dec2007 $2.01
Dec2006 $1.81
Dec2005 $1.57
Dec2004 $1.18
Dec2003 $0.80
Dec2002 $0.45

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – July 2015
Waste Management Inc. Analysis – 2015 Update $WM

Other ModernGraham posts about related companies

US Ecology Inc Valuation – Initial Coverage $ECOL
Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

US Ecology Inc Valuation – Initial Coverage $ECOL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how US Ecology Inc (ECOL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): US Ecology, Inc. is a provider of environmental services to commercial and government entities. The Company offers treatment, disposal and recycling of hazardous, non-hazardous and radioactive waste, as well as a range of field and industrial services. The Company operates in two business segments: Environmental Services, and Field & Industrial Services. Its Environmental Services segment provides a range of hazardous material management services, including transportation, recycling, treatment and disposal of hazardous and non-hazardous waste at Company-owned landfill, wastewater and other treatment facilities. The Company’s Field & Industrial Services segment provides packaging and collection of hazardous waste and total waste management solutions at customer sites and through its transfer facilities. Its services include on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste.

ECOL Chart

ECOL data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ECOL – August 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,044,508,956 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 68.94% Pass
6. Moderate PEmg Ratio PEmg < 20 30.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.65 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.60 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.58
MG Growth Estimate 3.29%
MG Value $23.75
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $22.84
MG Value based on 0% Growth $13.39
Market Implied Growth Rate 10.94%
Current Price $47.85
% of Intrinsic Value 201.44%

US Ecology Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.29 in 2013 to an estimated $1.58 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 10.94% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into US Ecology Inc revealed the company was trading above its Graham Number of $22.25.  The company pays a dividend of $0.72 per share, for a yield of 1.5%  Its PEmg (price over earnings per share – ModernGraham) was 30.37, which was below the industry average of 65.92, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.18.

US Ecology Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.18
Graham Number $22.25
PEmg 30.37
Current Ratio 1.91
PB Ratio 3.65
Current Dividend $0.72
Dividend Yield 1.50%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $126,127,000
Total Current Liabilities $65,897,000
Long-Term Debt $277,000,000
Total Assets $789,446,000
Intangible Assets $554,649,000
Total Liabilities $502,297,000
Shares Outstanding (Diluted Average) 21,890,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.71
Dec2016 $1.57
Dec2015 $1.18
Dec2014 $1.77
Dec2013 $1.72
Dec2012 $1.40
Dec2011 $1.01
Dec2010 $0.69
Dec2009 $0.77
Dec2008 $1.18
Dec2007 $1.06
Dec2006 $0.87
Dec2005 $0.86
Dec2004 $1.32
Dec2003 -$0.52
Dec2002 $1.15
Dec2001 $0.03
Dec2000 $0.26
Dec1999 $0.27
Dec1998 $0.03
Dec1997 -$0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.58
Dec2016 $1.51
Dec2015 $1.46
Dec2014 $1.51
Dec2013 $1.29
Dec2012 $1.06
Dec2011 $0.90
Dec2010 $0.87
Dec2009 $0.96
Dec2008 $1.05
Dec2007 $0.90
Dec2006 $0.79
Dec2005 $0.69
Dec2004 $0.55
Dec2003 $0.19
Dec2002 $0.48
Dec2001 $0.13

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Stericycle Inc Valuation – February 2017 $SRCL
Republic Services Inc Valuation – January 2017 $RSG
Clean Harbors Inc Valuation – Initial Coverage $CLH
Waste Management Inc Valuation – August 2016 $WM
Stericycle Inc. Analysis – October 2015 Update $SRCL
Republic Services Inc. Analysis – September 2015 Update $RSG
Waste Management Inc. Analysis – 2015 Update $WM
Stericycle Inc. Annual Stock Valuation – 2014 $SRCL
Republic Services Inc. Annual Stock Valuation – September 2014 $RSG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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