Waste Management, Inc. (WM), Republic Services, Inc. (RSG), Veolia Environnement SA (ADR) (VE): Could You Turn Trash Into Treasure With These Stocks?

Page 1 of 2

Garbage is big business. It might seem silly, but it’s true. The industry might seem more appropriate for a segment on Dirty Jobs, but there’s serious money to be made from trash. In fact, one of the major industry players, Waste Management, Inc. (NYSE:WM), is a favorite among income investors for its market-beating yield.

After considerable rallies, Waste Management, Inc. (NYSE:WM) and close peer Republic Services, Inc. (NYSE:RSG) now trade at multi-year highs.

In that light, is there still time for investors to strike gold from garbage? Or are you better off tossing these stocks into the dumpster?

Disturbing Debt

Waste Management, Inc. (NYSE:WM) and Republic Services, Inc. (NYSE:RSG) are both industrials, meaning they have lots of long-lived assets on the balance sheet. As is usually the case, lots of long-term assets are usually accompanied by a lot of long-term debt used to finance those assets.

At the same time, it’s not a great time to have a lot of debt on the balance sheet, particularly if that debt needs to be refinanced over time. Interest rates are on the rise, and I’m nervous about investing in companies with a lot of debt on their books.

To that end, at the end of the first quarter Waste Management, Inc. (NYSE:WM) had $9 billion in long-term debt on its balance sheet and just $6.7 billion in total shareholder’s equity. That means its long-term debt to equity ratio stands at a nauseating 134%.

Republic Services, Inc. (NYSE:RSG)’s long-term debt to equity ratio, meanwhile, sits at a better (but still uncomfortable) 91%.

Is growth a source of optimism?

Of course, high debt levels aren’t a huge cause for concern if the companies can grow at rates that make their interest expenses acceptable. Last year, Waste Management, Inc. (NYSE:WM) saw its revenues inch up 2% and its diluted earnings per share drop 14% from the year prior.

At the same time, Republic Services, Inc. (NYSE:RSG) reported a 1% drop in sales and flat diluted earnings per share in 2012, year over year.

Unfortunately, these growth figures aren’t exactly inspiring, and when you consider that each stock trades for more than 20 times trailing EPS, it’s looking more and more like these stocks are fully valued.

An international candidate to consider

An interesting alternative in the waste management industry is Veolia Environnement SA (ADR) (NYSE:VE). France-based Veolia Environnement SA (ADR) (NYSE:VE) does have exposure to the United States, a plus for investors reluctant to allocate capital to the shaky European economy.

Another huge plus for potential investors is the company’s gigantic dividend yield. Veolia Environnement SA (ADR) (NYSE:VE) pays an annual dividend, and according to Yahoo! Finance, 2013’s payout of $0.91 per share amounts to a greater-than 7.5% yield at recent prices.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!