Is Waste Management, Inc. (WM) a Good Stock to Buy?

Republic Services, Inc. (NYSE:RSG) and Waste Connections, Inc. (NYSE:WCN) are two of Waste Management, Inc. (NYSE:WM)’s peers. Waste Connections, Inc. (NYSE:WCN) is actually valued at a premium to Waste Management, with a trailing earnings multiple of 32, though the company has at least recently been doing quite well: in its last quarterly report revenue increased by 20% compared to the first quarter of 2012, and with margins expanding as well its net income grew 33%. We don’t expect that level of growth to be sustainable for very long, but it may be worth looking into how Waste Connections has been performing so well. Republic Services, Inc. (NYSE:RSG), another favorite stock of the Gates Foundation, is similar to Waste Management in that its recent financials don’t show much improvement compared to a year ago yet the trailing P/E is above 20. With that company actually experiencing a decline in earnings we would avoid it at this time.

We can also compare the company to Progressive Waste Solutions Ltd (NYSE:BIN) and to US Ecology Inc. (NASDAQ:ECOL). Both of these stocks are valued at more than 20 times their trailing earnings as well, though similarly to Waste Connections they have been recording decent numbers as well: in each case revenue and net income grew at double-digit rates in the company’s most recent quarterly report compared to the same period in the previous year. US Ecology is actually priced about in line with Waste Management, and we’d be interested in looking into why the market is so much less optimistic about it. Progressive Waste Solutions Ltd (NYSE:BIN), with trailing and forward P/Es of 26 and 20 respectively, does seem to have further growth priced in to some degree.

Waste Management doesn’t look very interesting to us: the combination of yield and beta aren’t that outstanding, from an income perspective, and in terms of value the stock certainly doesn’t look undervalued given the stagnant recent performance. However, some other companies in the industry, notably US Ecology, trade at similar multiples but have been doing well enough according to their recent reports that they may be interesting growth plays.

Disclosure: I own no shares of any stocks mentioned in this article.