WM
WM
Hold 2026-03-15
Model
DDM
Price at Report
$238.53
Base IV
$255.27
Bear IV
$193.08
Bull IV
$342.15
Entry Zone: 203-235 · Sell Above: 291
Bore Family Office
Valuation Report — Waste Management (WM) • March 15, 2026
3-Stage DDM (Ke) • Discount Rate: 7.20% • Current Price: $238.53
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Waste Management, Inc. is the largest integrated waste management company in North America, providing collection, transfer, recycling, and disposal services to residential, commercial, industrial, and municipal customers in the United States and Canada. Through its network of ~263 collection operations, 342 transfer stations, 260 active landfills, 152 recycling facilities, and 30+ renewable natural gas (RNG) facilities, WM processes more garbage than any other company in the Americas.
WM acquired Stericycle in FY2024 for approximately $7.2 billion, adding regulated medical waste disposal, hazardous waste, and secure document destruction services. The acquisition expands WM's environmental services footprint and is expected to generate ~$125M in annual cost synergies by 2027. WM's competitive moat is formidable: landfills are irreplaceable, permitted infrastructure assets with multi-decade useful lives, and regional duopolies make price competition structurally limited. The company also benefits from the secular growth of renewable energy — converting landfill gas to RNG is a growing, high-margin revenue stream.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Collection (Residential) | $6,800M | 27% | +8.0% | — | Curbside and transfer services; regulated pricing |
| Collection (Commercial/Industrial) | $8,600M | 34% | +9.0% | — | Commercial hauling; volume + price driven |
| Disposal (Landfill/Transfer) | $5,500M | 22% | +10.0% | — | Tipping fees; irreplaceable asset; pricing power |
| Recycling & Renewable Energy | $2,300M | 9% | +15.0% | — | Commodity recycling + RNG; growing margin contributor |
| Stericycle / Other | $2,000M | 8% | +20.0% | — | Medical waste, hazardous, secure document destruction |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $17,931 | $19,698 | $20,426 | $22,063 | $25,204 |
| EBITDA ($M) | $4,964 | $5,403 | $5,646 | $6,330 | $7,171 |
| Operating Income ($M) | $2,965 | $3,365 | $3,575 | $4,063 | $4,308 |
| Net Income ($M) | $1,816 | $2,238 | $2,304 | $2,746 | $2,708 |
| EPS (diluted) | $4.29 | $5.39 | $5.66 | $6.81 | $6.70 |
| Free Cash Flow ($M) | $2,434 | $1,949 | $1,824 | $2,159 | $2,816 |
| Annual DPS | $2.300 | $2.600 | $2.800 | $3.000 | $3.300 |
| Total Debt ($M) | $13,405 | $14,984 | $16,229 | $23,900 | $22,907 |
| Rev YoY Growth | — | +9.9% | +3.7% | +8.0% | +14.2% |
| EBITDA Margin | 27.7% | 27.4% | 27.6% | 28.7% | 28.5% |
| Operating Margin | 16.5% | 17.1% | 17.5% | 18.4% | 17.1% |
| Net Margin | 10.1% | 11.4% | 11.3% | 12.4% | 10.7% |
📈 DDM Scenarios
$193
🔴 Bear
$255
📊 Base
$342
🚀 Bull
$238.53
Current Price
$254
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.8% | 2.0% | 2.0% | 7.20% | $193 | ▼19.1% |
| 📊 Base | 6.0% | 4.0% | 2.5% | 7.20% | $255 | ▲7.0% |
| 🚀 Bull | 9.2% | 6.0% | 3.0% | 7.20% | $342 | ▲43.4% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.8% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $9.766 | $9.110 | $9.11 |
| Year 2 | Stage 1 | $10.039 | $8.736 | $17.85 |
| Year 3 | Stage 1 | $10.321 | $8.378 | $26.22 |
| Year 4 | Stage 1 | $10.610 | $8.034 | $34.26 |
| Year 5 | Stage 1 | $10.907 | $7.704 | $41.96 |
| Year 6 | Stage 2 | $11.125 | $7.330 | $49.29 |
| Year 7 | Stage 2 | $11.347 | $6.975 | $56.27 |
| Year 8 | Stage 2 | $11.574 | $6.636 | $62.90 |
| Year 9 | Stage 2 | $11.806 | $6.314 | $69.22 |
| Year 10 | Stage 2 | $12.042 | $6.008 | $75.23 |
| Terminal | — | TV=$236.20 | PV(TV)=$117.85 (61% of IV) |
Base Scenario
Stage 1: 6.0% | Stage 2: 4.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $10.070 | $9.394 | $9.39 |
| Year 2 | Stage 1 | $10.674 | $9.289 | $18.68 |
| Year 3 | Stage 1 | $11.315 | $9.185 | $27.87 |
| Year 4 | Stage 1 | $11.994 | $9.082 | $36.95 |
| Year 5 | Stage 1 | $12.713 | $8.980 | $45.93 |
| Year 6 | Stage 2 | $13.222 | $8.712 | $54.64 |
| Year 7 | Stage 2 | $13.751 | $8.452 | $63.09 |
| Year 8 | Stage 2 | $14.301 | $8.200 | $71.29 |
| Year 9 | Stage 2 | $14.873 | $7.955 | $79.25 |
| Year 10 | Stage 2 | $15.467 | $7.717 | $86.96 |
| Terminal | — | TV=$337.32 | PV(TV)=$168.31 (66% of IV) |
Bull Scenario
Stage 1: 9.2% | Stage 2: 6.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $10.374 | $9.677 | $9.68 |
| Year 2 | Stage 1 | $11.328 | $9.858 | $19.54 |
| Year 3 | Stage 1 | $12.371 | $10.042 | $29.58 |
| Year 4 | Stage 1 | $13.509 | $10.229 | $39.81 |
| Year 5 | Stage 1 | $14.752 | $10.420 | $50.23 |
| Year 6 | Stage 2 | $15.637 | $10.303 | $60.53 |
| Year 7 | Stage 2 | $16.575 | $10.188 | $70.72 |
| Year 8 | Stage 2 | $17.569 | $10.074 | $80.79 |
| Year 9 | Stage 2 | $18.623 | $9.961 | $90.75 |
| Year 10 | Stage 2 | $19.741 | $9.850 | $100.60 |
| Terminal | — | TV=$484.12 | PV(TV)=$241.55 (71% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.2% | $352 | $393 | $450 | $532 | $663 |
| 5.7% | $309 | $339 | $378 | $433 | $512 |
| 6.2% | $274 | $297 | $326 | $364 | $416 |
| 6.7% | $247 | $265 | $287 | $314 | $351 |
| 7.2% | $224 | $238 | $255 | $276 | $303 |
| 7.7% | $205 | $217 | $230 | $246 | $266 |
| 8.2% | $189 | $199 | $209 | $222 | $238 |
| 8.7% | $176 | $183 | $192 | $202 | $215 |
| 9.2% | $163 | $170 | $177 | $186 | $195 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E (Fwd) | EV/EBITDA | FCF Yield | Div Yield | Div Growth (5yr) |
|---|---|---|---|---|---|
| WM (Current) | 28.2x | 19.1x | 3.1% | 1.6% | 10.5% |
| RSG (Republic Services) | 27.5x | 18.5x | 3.4% | 1.4% | 9.2% |
| CWST (Casella Waste) | 35.2x | 22.0x | 2.1% | 0.0% | — |
| CLH (Clean Harbors) | 26.8x | 16.5x | 3.8% | 0.0% | — |
| GFL (GFL Environmental) | 32.1x | 19.8x | 2.8% | 0.1% | 20.0% |
| Waste Sector Average | 30.0x | 19.2x | 3.0% | 0.8% | — |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $3.780 |
| Current Yield | 1.58% |
| Consecutive Growth Years | 22 |
| 1-yr DPS CAGR | +11.2% |
| 3-yr DPS CAGR | +10.3% |
| 5-yr DPS CAGR | +10.5% |
| 10-yr DPS CAGR | +8.1% |
| Payout Ratio (DPS/EPS) | 56.4% |
| FCF Payout Ratio | 54.2% |
| Sustainability Verdict | Safe |
WM's dividend is rock-solid. 22-year consecutive growth streak through multiple recessions. FCF payout ratio ~54% provides ample buffer for continued growth and debt reduction. The 14.5% Q1 2026 dividend raise (to $0.945/qtr) signals strong management confidence in Stericycle integration and FCF recovery. At normalized FCF/share of ~$9.50 post-synergies, FCF payout falls to ~40% — even more room to accelerate DPS growth. Dividend is safe even in a severe recession: waste collection is non-discretionary — volumes decline modestly in recessions but don't collapse.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $4.29 | — | — | — | Actual |
| 2022 | $5.39 | — | — | — | Actual |
| 2023 | $5.66 | — | — | — | Actual |
| 2024 | $6.81 | — | — | — | Actual |
| 2025 | $6.70 | — | — | — | Actual |
| 2026 | $7.54 | $8.45 | $9.40 | 32 | Estimate |
| 2027 | $8.53 | $9.64 | $10.65 | 31 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $17931.0B | — | — | — | Actual |
| 2022 | $19698.0B | — | — | — | Actual |
| 2023 | $20426.0B | — | — | — | Actual |
| 2024 | $22063.0B | — | — | — | Actual |
| 2025 | $25204.0B | — | — | — | Actual |
| 2026 | $25600.0B | $27290.0B | $27900.0B | 32 | Estimate |
| 2027 | $26700.0B | $28760.0B | $29800.0B | 31 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $253.95 | Range $230–$270
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| James Schumm | TD Cowen | Strong Buy | $270 | +13.2% |
| Noah Kaye | Oppenheimer | Buy | $264 | +10.7% |
| Jerry Revich | Wells Fargo | Buy | $250 | +4.8% |
| Sabahat Khan | RBC Capital | Hold | $235 | -1.5% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $1.62 vs $1.58 | +$0.04 ✅ | $6440.0B vs $6330.0B | +$110.0B ✅ | Strong 2026 outlook; synergies on track |
| Q3 2025 | $1.80 vs $1.77 | +$0.03 ✅ | $6400.0B vs $6310.0B | +$90.0B ✅ | Stericycle integration progressing |
| Q2 2025 | $1.71 vs $1.69 | +$0.02 ✅ | $6370.0B vs $6280.0B | +$90.0B ✅ | Full-year EPS raised |
| Q1 2025 | $1.57 vs $1.52 | +$0.05 ✅ | $5990.0B vs $5900.0B | +$90.0B ✅ | FY2025 guidance maintained |
(e) Confidence Band Commentary
WM has 19 active analysts with a narrow $230–$270 PT range — one of the tightest I've seen for a company this size. This reflects WM's exceptional earnings predictability and visible revenue model. Consecutive EPS beats across all 4 quarters of 2025 (2-4% upside each time) demonstrate strong execution despite the Stericycle integration complexity. The 26% EPS jump consensus for FY2026 reflects synergies, cost cuts, and normal capex cycling — this is the year the Stericycle deal pays off. If WM delivers $8.45+ EPS in 2026, expect PT upgrades toward $270-285.
💡 Investment Thesis
- Irreplaceable infrastructure moat: WM operates 260 active landfills — permitted, impossible-to-replicate assets that take 15-20 years to permit (if ever). This creates regional pricing power and protects volumes from competition. No one is building a new landfill next to an existing one.
- 22-year dividend growth streak + accelerating DPS: WM just raised its dividend 14.5% to $0.945/qtr ($3.78 annualized) — highest in company history. With Stericycle synergies boosting FY2026 EPS by 26% to $8.45, DPS growth should accelerate further. 22 consecutive years of raises is not accidental.
- Stericycle acquisition creates a new growth vector: The $7.2B deal adds regulated medical waste (contractual, recurring) and hazardous waste services. $125M in targeted cost synergies by 2027 should be visible in margins by mid-2026. The deal is immediately accretive to EPS and FCF/share on a synergy-adjusted basis.
- Renewable natural gas (RNG) is a hidden gem: WM converts landfill methane to RNG and sells it to utilities and transportation companies. This high-margin revenue stream is growing 15%+/yr as ESG demand increases. WM has 30+ RNG facilities; plan to add more through 2030.
- Inflation pass-through built into contracts: ~70% of WM's revenue is tied to CPI/contractual escalators. In inflationary environments, WM outperforms — price increases cover cost inflation while volumes remain stable (trash is non-discretionary).
⚖️ DDM Verdict: Hold — Waste Management (WM)
Current price: $238.53 | Analyst Avg PT: $253.95
$193
🔴 Bear
$255
📊 Base
$342
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$235 | Begin position |
| Tier 2 — Add | ≤$224 | Add on weakness |
| Tier 3 — Full | ≤$203 | Full allocation |
| Sell Alert | ≥$291 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Accumulate at current levels. WM's Base DDM intrinsic value of $255.27 is 7.0% above the current price of $238.53, supported by the $253.95 analyst consensus PT. The recent 14.5% dividend increase signals management confidence in FCF recovery post-Stericycle. This is a high-quality compounder at a reasonable price.
The existing position (47 shares at $163.47 avg cost = $3,877 cost basis, currently ~$11,237 market value) is a significant unrealized winner. Continue holding and add on weakness below $230 (near analyst low PT). Becomes a Hold above $270 (approaching Bull IV). No compelling reason to trim — long-term hold for income + capital appreciation.
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 47.15 |
| Average Cost Basis | $163.47 |
| Current Market Value | $11,247 |
| Unrealized P&L | $+3,539 (+45.9%) |
| Annual DPS | $3.780/yr |
| Annual Dividend Income | $178/yr |
| Current Yield (at price) | 1.58% |
| Yield on Cost | 2.31% |
| vs Target (~$200K) | $11,247 / $200,000 (6%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DDM (3-stage) using forward FCF/share as base. WM is a consistent dividend grower (22 years) with predictable cash flows. FCF/share rather than DPS used as base — following the PM/MCD lesson for companies where market prices total distributable FCF. DPS-only DDM would give ~$100-120, far below market; FCF/share base correctly values the total cash generation. |
| Ke Build | Ke = 4.30% (10yr Treasury) + 0.53 (β) × 5.50% (ERP) = 7.22%. WM's β≈0.50–0.60 reflects quasi-essential services characteristics — waste collection is non-discretionary, contracted, and price-regulated. Lower β than industrials is appropriate; similar to utilities. Used 0.53 empirically. |
| FCF Base (Normalized) | Using $9.50/share as forward normalized FCF base (vs FY2025 reported $6.97/share). Rationale: (1) FY2025 FCF depressed by Stericycle acquisition costs/capex; (2) Analyst EPS consensus $8.45-$9.64 for FY2026-2027 implies FCF/share of ~$9-11 at ~$11% FCF margin; (3) $9.50 is conservative midpoint. This is not "cherry-picking" — it correctly models the recoverable steady-state cash generation. |
| Sanity Check | Base IV $255.27 vs analyst PT $253.95 = +0.5% — excellent alignment. Current price $238.53 = 6.5% below Base IV, suggesting modest undervaluation consistent with analyst consensus. |
| Stericycle Integration | WM acquired Stericycle for ~$7.2B in FY2024, adding $2B+ in annual revenue (medical waste, hazardous, secure documents). Integration is on track; $125M annual cost synergies targeted by 2027. Goodwill jumped from $9.3B to $13.9B; net debt rose to $22.7B. Deal is FCF/EPS accretive on synergy-adjusted basis — EPS recovering from $6.70 to $8.45+ in FY2026 confirms. |
| Net Debt Context | Net debt $22.7B at ~3.2× EBITDA ($7.17B) is manageable for regulated infrastructure. Investment grade (Baa3/BBB). WM has historically carried 3-4× leverage; Stericycle acquisition moved leverage to top of range. Expected to delever to <3.0× by 2027 via FCF generation. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.