The dynamics of the waste management sector are shifting, with a surge in governmental regulations, a fusion of advanced technologies, and an augmented awareness of environmental issues. The sector capitalizes on mounting industrialization and urbanization, coupled with a heightened focus on enhanced waste management practices. According to Statista, the global waste management sector hit a value of $1.6 trillion in 2020 and is projected to witness substantial growth, reaching $2.5 trillion by 2030. This expansion is underpinned by enhanced waste collection methods and the escalating waste volumes in emerging markets.
Waste Management, Inc. WM, Republic Services, Inc. RSG and Stericycle, Inc. SRCL are some stocks anticipated to benefit from the above-mentioned factors.
Unraveling the Waste Management Industry
Companies in the Zacks Waste Removal Services industry crucially manage diverse waste types, aiming to minimize their impact on both the environment and public health. This market is segmented based on the type of waste, including Industrial, Commercial, Domestic, and Agricultural waste. The Industrial waste segment has gained significance due to the ongoing industrial expansion, creating a substantial demand for efficient waste management solutions. The market encompasses Collection and Disposal services. The Disposal services segment, primarily fueled by the growing need for waste recycling to mitigate environmental impacts, stands as the primary revenue-generating category.
Shaping the Future of Waste Removal Services Industry
Revenues, income, and cash flows in the industry are expected to gradually reach pre-pandemic levels, facilitating most industry players in paying out stable dividends.
Waste management is pivotal to Environmental, Social, and Governance (ESG) goals, as it enables companies to elevate their ESG ratings by championing environmental sustainability, fostering social well-being, and upholding good governance.
Technology has evolved as a critical ally in waste management, addressing the challenges of waste generation and environmental impact, guiding us toward responsible waste management and a cleaner planet.
Waste-to-energy (WTE) technology transforms waste into energy, offering a renewable energy source and addressing the mounting waste challenge, vital in the era of clean energy.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Waste Removal Services industry, within the Zacks Business Services sector, currently carries a Zacks Industry Rank #103, placing it in the top 42% of 248 Zacks industries.
Research indicates that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Industry Outperforms Sector but Lags S&P 500
The Zacks Waste Removal Services industry has outperformed the broader Zacks Business Services sector but lagged behind the Zacks S&P 500 composite over the past year.
With a 19.4% increase over the period, the industry surpassed the 13.8% surge in the broader sector but fell shy of the 21.3% uptick of the Zacks S&P 500 composite.
One-Year Price Performance
On the basis of EV-to-EBITDA, the industry is currently trading at 12.07X compared with the S&P 500’s 14.1X and the sector’s 27.49X.
Over the past year, the industry has traded as high as 13.06X and as low as 8.23X, with the median being 11.31X.
EV-to-EBITDA
3 Waste Management Stocks to Consider
Among the companies benefiting from the favorable industry conditions, three recommended companies carry a Zacks Rank #2 (Buy) each.
Revolutionizing the Waste Management Sector: A Deeper Dive into Key Players
In an era of environmental consciousness and internal expansion, waste management companies are actively enhancing operational efficiency. Through initiatives like transitioning to compressed natural gas collection vehicles and upgrading rear-loading trucks to automated-side loaders, companies like Republic Services strive to achieve cost reduction and improved profitability.
A Look at Republic Services
Republic Services, a prominent industry player, exhibits a commitment to economic and environmental sustainability. Their 2023 revenues are expected to grow 10% from the year-ago reported figure. With a steady long-term expected EPS growth rate of 9.97%, and a substantial gain of 36.8% in the past year, Republic Services is setting a high industry standard that competitors strive to match.
Price & Consensus: RSG
Exploring Waste Management
Waste Management has solidified its position as a leading waste management company in the United States. Their commitment to implementing fundamental operational strategies, effective pricing, and cost control has bolstered growth. With 2023 revenues expected to grow 3.5% and a long-term expected EPS growth rate of 10.02%, Waste Management has gained 20.8% in the past year, showcasing its resilience in the industry.
Price & Consensus: WM
Insights into Stericycle
Stericycle, specializing in medical waste management and compliance solutions, has carved a niche for itself. With a decline of 9% in the past year, Stericycle faces challenges, with 2023 revenues expected to decline 1.2%. However, with a long-term expected EPS growth rate of 8%, Stericycle maintains a foothold in the industry, showcasing its potential for resurgence.
Price & Consensus: SRCL
Overall, the waste management industry presents a dynamic landscape for investors to navigate. While Republic Services and Waste Management reflect positive growth and innovation, Stericycle faces challenges that underscore the competitive nature of the sector. Investors need to carefully consider these factors before making strategic investment decisions.
As companies continue to evolve, the waste management sector remains a captivating domain for investment opportunities. The commitment to sustainability and operational excellence underscores the industry’s potential for robust growth in the coming years.
