Since June 2024, Waste Management has been in a holding pattern, posting a small loss of 3.2% while floating around $205.38. The stock also fell short of the S&P 500’s 10.4% gain during that period.
Is there a buying opportunity in Waste Management, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.We're sitting this one out for now. Here are three reasons why you should be careful with WM and a stock we'd rather own.
Why Is Waste Management Not Exciting?
Headquartered in Houston, Waste Management (NYSE: WM) is a provider of comprehensive waste management services in North America.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Waste Management’s sales grew at a mediocre 6.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector. 
2. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Waste Management’s margin dropped by 4.2 percentage points over the last five years. If its declines continue, it could signal higher capital intensity. Waste Management’s free cash flow margin for the trailing 12 months was 10.3%.
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Waste Management’s revenue to rise by 6.3%, close to its 4.9% annualized growth for the past two years. This projection doesn't excite us and implies its newer products and services will not catalyze better top-line performance yet.
Final Judgment
Waste Management isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 26.7× forward price-to-earnings (or $205.38 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at Yum! Brands, an all-weather company that owns household favorite Taco Bell.
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