Waste Management Overvalued: Downgraded Ratings

Waste Management, a $90 billion waste company, has reached all-time highs and is considered overvalued. Despite previous neutrality on the company, the author recommends a ratings downgrade. The article does not provide specific details on the downgrade or reasons for it.

Title: Waste Management: Overvalued Giant Faces Ratings Downgrade

Waste Management (NYSE: WM), a more than $90 billion waste company, has reached all-time highs, prompting a ratings downgrade by analysts. Despite previously maintaining a neutral stance, the company's overvaluation and slow growth have led to this change in recommendation. Waste Management, the largest waste processing company in the United States, has a multi-decade history and generates billions in annual revenue. However, its valuation and growth prospects have raised concerns among investors.

The company's enterprise value exceeds $110 billion, and it has a diluted EPS that puts it at a P/E of just under 30x. While the company has managed to grow its revenue by double-digits YoY, its income from operations has grown at a lower level, with an operating EBITDA margin of just under 30%. The company's earnings growth rate is in the mid-single-digits, which does not justify its high valuation.

Analysts have recommended selling Waste Management due to its overvaluation and slow growth. The company's net CFFO in the 1H 2025 was $2.75 billion, with $1.29 billion in FCF, resulting in a sub 3% FCF yield. The company's dividend yield is less than 1.5%, reflecting its low shareholder returns. The company's return rate is more than 2% below the S&P 500, making it a poor investment compared to the benchmark.

The largest risk to the company's thesis is its long-term assets and the premium it trades at. Despite its reliable cash flow, the company's growth is not substantial enough to justify its high valuation. The S&P 500 is at record highs, and major analysts expect underperformance, making Waste Management a less attractive investment.

Waste Management has built a strong business with 30% margins and reliable earnings. However, its high valuation and slow growth make it a poor investment. The company is expected to underperform the S&P 500, making it a risky choice for investors.

References
[1] https://seekingalpha.com/article/4815122-waste-management-an-overvalued-giant-ratings-downgrade
[2] https://www.marketbeat.com/instant-alerts/filing-burgundy-asset-management-ltd-has-4403-million-stock-position-in-waste-connections-inc-nysewcn-2025-08-17/