We recently compiled a list of the 12 Best Waste Management Stocks to Invest In Now. In this article, we are going to take a look at where Waste Connections, Inc. (NYSE:WCN) stands against the other waste management stocks.
Waste management stocks include those companies that provide supporting environmental, engineering, and consulting services, as well as those that gather, process, store, transport, recycle, and dispose of waste products.
The waste management industry is expanding rapidly. The market was worth $1,293.70 billion in 2022 and is projected to grow at a CAGR of 5.4% between 2023 and 2030, according to Grand View Research. Strict laws like the Resource Conservation and Recovery Act and the Waste Shipment Regulation are anticipated to drive the market to improve this service. In 2022, the collection segment held a dominant market share of over 62.0%. The industrial waste industry dominated the market, accounting for more than 85.9% in 2022. It is anticipated that during the projection period, the e-waste segment will grow at the quickest CAGR of 7.4%. Asia Pacific led the industry, accounting for more than 24.5% of the market in 2022. The projection period is anticipated to see the Middle East and Africa grow at a compound annual growth rate (CAGR) of 5.6%.
According to Debra Reinhart, a Board of Scientific Counselors member for the EPA:
“It’s a difficult industry, but it is profitable if it’s done right.”
Waste management is critical to promoting the growth of sustainable energy by reducing environmental impact, recovering valuable materials, and increasing resource efficiency. According to Deloitte’s insights, land, water, and waste management must all be integrated in order to achieve a sustainable energy transition. Repurposing brownfield sites, abandoned power stations, and landfills for solar or battery storage maximizes land usage, while spatial mapping technologies reduce environmental effects. Water efficiency can be improved by recycling wastewater, using brackish and greywater, and switching to closed-cycle cooling systems. Advanced sorting, material recovery from retired equipment, and robotics are all waste reduction solutions that prioritize safety and efficiency. Moreover, cross-industry collaboration promotes industrial symbiosis, resulting in maximum resource utilization. Circular design concepts help to increase product life and facilitate disassembly. Increased renewable energy efficiency reduces land and waste footprints. Smart sensors and IoT technology reduce water leaks, while industrial sites’ centralized recycling networks reduce freshwater extraction and wastewater outflow. These methods promote a sustainable and resource-efficient energy transition.
According to S&P Global’s October 2, 2024, report, private equity and venture capital investments in the waste management sector were projected to decline further in 2024 as investors moved their focus to circular economy solutions rather than traditional waste services. Global PE and VC-backed deals totaled $247.2 million in 2024, accounting for only 7% of the $3.62 billion reported in 2023, according to S&P Global Market Intelligence. The sector has steadily declined since peaking at $8.87 billion in 2021. The number of transactions declined in 2024 when compared to 2023 and 2022. In Q3 2024, the deal value was $8.3 million, down from $2.42 billion in Q3 2023, with only six transactions compared to 22 in the same period last year.
The report further mentioned that eleven deals were announced in the United States and Canada, with seven deals in Europe and Asia-Pacific each. In terms of deal value, the United States and Canada received $116 million in announced investments, while Europe raised $104.5 million. Waste management enterprises in the Asia-Pacific received $26.7 million in private equity financing.
Looking forward, as per the UN’s Global Waste Management Outlook 2024, municipal solid waste generation is projected to jump from 2.1 billion tonnes in 2023 to 3.8 billion tonnes by 2050. In 2020, direct waste management expenses reached $252 billion, but hidden costs from pollution and climate change boosted the total to $361 billion. Without intervention, annual costs could nearly quadruple to $640.3 billion by 2050. Implementing waste management methods may reduce net expenses to $270.2 billion, whereas a circular economy could result in a $108.5 billion yearly net gain. The report calls on governments, businesses, and citizens to take action to mitigate rising prices and environmental impact.
A fleet of waste management trucks driving through a city at sunrise.
Our Methodology
We sifted through holdings of waste management ETFs and online rankings to form an initial list of 30 Waste Management stocks. From the resultant dataset, we chose the top 12 stocks most favored by hedge funds, using Insider Monkey’s database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Waste Connections, Inc. (NYSE:WCN)
Number of Hedge Fund Investors: 49
As a fully integrated waste carrier, Waste Connections, Inc. (NYSE:WCN) uses its extensive network of collection routes to maintain significant control over the waste stream, moving trash from commercial, industrial, and residential end markets to its valuable disposal properties. Its secondary and rural market strategy has lower competition and higher profit margins than larger, urban-focused competitors Waste Management and Republic Services. Moreover, the firm has great pricing power, which is a result of its wide economic moat. The business has been able to protect profit margins in the present inflationary climate because of its pricing power.
The firm’s fourth-quarter 2024 revenue climbed 11% year on year, with strong pricing and acquired revenue more than offsetting reduced volumes. The adjusted EBITDA margin, which excludes a substantial charge for landfill closure, was 32.4%, up 20 basis points year on year. Thus, Waste Connections, Inc. (NYSE:WCN) is among the Best Waste Management Stocks.
Strategic acquisitions have been a key component of Waste Connections, Inc. (NYSE:WCN)’s growth strategy. In 2024, the firm completed acquisitions that generated more than $700 million in yearly sales. Notably, the purchase of Royal Waste Services for $39 million raised the company’s presence in New York City, enabling it to oversee up to 15 waste collection zones, which is the maximum permitted by law due to overlapping service areas.
Oppenheimer raised Waste Connections, Inc. (NYSE:WCN)’s price objective to $196 from $195, retaining an Outperform rating on the stock. The firm notes that shares dipped in the low single digits Thursday after it announced Q4 adjusted EBITDA/EPS below consensus projections while anchoring FY25 expectations toward the high end of guidance, which was slightly higher than the Street.
Overall, WCN ranks 3rd on our list of the Best Waste Management Stocks to Invest In Now. While we acknowledge the potential for WCN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WCN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.