We recently compiled a list of the 10 Best Waste Management Stocks to Buy According to Analysts. In this article, we are going to take a look at where Republic Services, Inc. (NYSE:RSG) stands against the other waste management stocks.
The waste management industry is experiencing robust growth as industrialization and urbanization gather steam. Positive trends in government regulations and the use of advanced technologies in waste management are also fueling growth. According to Grand View Research the industry was valued at $1.29 trillion in 2022 and is projected to grow at a compound annual growth rate of 5.4% from 2023 to 2030.
The growth is expected to gather pace due to stringent government regulations pertaining to resource conservation and waste shipment regulation to improve service delivery. Escalating waste volumes from medical facilities industries to residential settings due to urbanization are also expected to impact the sector positively. The sector is also supported by factors such as the growth of smart cities and the rising use of integrated waste management systems.
READ ALSO: 10 Best Recycling Stocks to Buy According to Hedge Funds and 11 Best NYSE Penny Stocks to Buy Right Now.
The surge in hazardous waste is one of the factors strengthening the prospects of waste management companies. America has consistently topped the charts as the most wasteful country in the world, with over 239 million metric tons of garbage every year. While most people might perceive it as a threat to the environment and society, it presents a massive opportunity for waste management companies.
“It’s a profitable industry,” 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.”
Consequently, advanced waste disposal methods and techniques have emerged as a result of growing awareness about proper waste disposal to preserve the health of humans and animals. Waste management companies must dispose of or recycle waste on time due to the presence of large quantities of hazardous compounds, including metals and salts.
The growing demand for efficient solid waste management frameworks and strategies that prioritize public security and economic development is a welcome for waste management companies. For starters, it’s made it possible for companies to hike prices for their services, citing their efficient solid waste management systems. The price increases have resulted in robust revenue growth and improved profit margins, allowing waste management companies to generate more shareholder value.
As long as there are people and companies who see trash as a resource rather than waste, the solid waste management sector will only keep growing. As governments worldwide agitate for a safe environment free of hazardous or other waste materials, companies engaged in waste management will always record booming business.
Similarly, as the US economy steers from recession following the Federal Reserve cutting interest rates for the second time, booming industrial activity is expected, resulting in more waste generated by factories. Likewise, consumer purchasing power has also been boosted, given the low interest rates in play, which should result in more waste volume due to increased spending on various items.
Consequently, waste management companies are on the cusp of booming business due to higher waste volumes. With most hiking prices amid limited opposition, now would be the best time to closely watch the best waste management stocks to buy as they are well poised to generate long-term value.
Our Methodology
To compile the list of the best waste management stocks to buy according to analysts, we scanned the stock market for companies engaged in all kinds of waste management. We then settled on waste management stocks that Wall Street analysts believe are well poised to explode backed by solid underlying fundamentals. Upon analyzing hedge fund sentiment and holdings, we ranked the stocks in ascending order based on their upside potential, as of November 22.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of trucks carrying recyclable materials, highlighting the company’s transfer services.
Republic Services, Inc. (NYSE:RSG)
Market cap as of November 22, 2024: $67.03 Billion
Number of Hedge Fund Holders: 45
Stock Upside Potential: 4.72%
Republic Services, Inc. (NYSE:RSG) is an industrial company that collects and processes recyclable solid waste and industrial waste materials. The company has carved a niche as one of the best waste management stocks, going by the 29.78% year-to-date gain owing to its commitment to sustainability and innovation. The company has also embarked on an aggressive acquisition strategy that has seen it acquire Advanced Chemical Transport LLC and Central Texas Refuse, LLC, bolstering its prospects in the environmental solutions sector.
One of Republic Services, Inc.’s (NYSE:RSG) strong points has been the Environmental Solutions division, which has shown excellent margin performance, a sign of efficient operations and cost control. The company delivered impressive third-quarter results on October 29, 2024, as it benefited from strong pricing ahead of cost inflation and on the back of effective cost management.
Revenue in the quarter was up by 6.5% to $4.08 billion, including 4.2% organic growth and 23% from acquisitions. Net income also rose to $565.7 million or $1.80 a share from $480.2 million or $1.52 a share delivered the same quarter last year. The solid financial results affirm Republic Services, Inc. (NYSE:RSG)’s well-designed strategy expected to drive sustainable growth while creating shareholder value.
ClearBridge Investments stated the following regarding Republic Services, Inc. (NYSE:RSG) in its Q2 2024 investor letter:
“We added two new names to the portfolio in the quarter. Republic Services, Inc. (NYSE:RSG) is a waste disposal company in the industrial sector whose services include non-hazardous solid waste collection, waste transfer, waste disposal, recycling and energy services. It is a stable-through-the-cycle compounder in a consolidated industry. The company’s end market is resilient, which gives us some confidence in the stability of its earnings through a recession. In the next few years, cash flow should grow at the high end of the range as Republic Services benefits from high-returning sustainability investments in polymer recycling and renewable natural gas, which also improve the company’s emission and circularity profile.
Republic Services continues to set ambitious goals around sustainability targets, such as increasing its renewable energy generation by 50% through the beneficial reuse of biogas. In addition, its 74 recycling centers process five million tons of materials per year and include a major polymers centre for plastics. Notably, it is the first North American waste and recycling company with an emissions reduction goal approved by the Science-Based Targets initiative (SBTi).”
Overall RSG ranks 8th on our list of the best waste management stocks to buy according to analysts. While we acknowledge the potential of RSG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RSG 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.
