8 Best TSX Stocks To Invest In Now

3. Waste Connections (NYSE:WCN)  

Number of Hedge Fund Investors: 50

Waste Connections (NYSE:WCN) is a Canadian integrated waste services company that provides solid waste collection, transfer, disposal, and recycling services. Waste Connections (NYSE:WCN) operates across the U.S. and Canada and is known for its decentralized business model that focuses on local management and high margins. Waste Connections (NYSE:WCN) serves both residential and commercial customers and has long-term contracts and a steady demand for waste management.

In Q2, Waste Connections (NYSE:WCN) reported a 11.2% revenue growth and 16.4% increase in EBITDA. The company’s solid waste margin improved by 80-90bps, driven by the termination of unprofitable contracts, optimization of third-party cost structures, and easing cost inflation.

Waste Connections’ (NYSE:WCN) strong pricing realization and robust M&A pipeline are key drivers of its growth. The company has terminated low-margin contracts, resulting in a better margin profile and lower volume growth. Its M&A strategy, focused on small and tuck-in deals, has generated cost and revenue synergies, the company has spent $1.5 billion on acquisitions this year.

Despite these acquisitions, Waste Connections (NYSE:WCN) maintains a robust balance sheet, with debt leverage of 2.67x and sufficient capital for future acquisitions, share buybacks, and dividend payouts. The company’s disciplined pricing policy and focus on contract renewals and new contracts are expected to drive pricing growth, while volume growth is expected to revert to historical average levels.

Based on these factors, analysts expect that Waste Connections’ (NYSE:WCN) revenue will grow by 10.5% annually, with an operating margin of 22.8% by FY33. TimesSquare Capital stated the following regarding Waste Connections, Inc. (NYSE:WCN) in its first quarter 2024 investor letter:

“Many of our Industrials positions provide necessary business-to-business operational services, highly technical components, automation & efficiency improvements, or essential infrastructure services. Adding value to the strategy was Waste Connections, Inc. (NYSE:WCN), which collects, transfers, recycles, and disposes of waste for municipalities and businesses in the U.S. and Canada. Revenues and earnings topped expectations, as did management’s initial guidance for 2024. The company projects near-term growth in volumes and pricing, which recent acquisitions should make more than likely. As Waste Connection’s shares climbed 15%, we trimmed our holdings.”

The company’s strong growth prospects, combined with its robust balance sheet and disciplined pricing policy, make it a compelling investment opportunity. In the second quarter, Waste Connections’ (NYSE:WCN) stock was held by 50 hedge funds with stakes worth $1.52 billion.