I like stocks that have forecasts of increasing of both sales and earnings along with recent positive price momentum, and today Waste Connections (WCN) fits that criteria. Waste disposal is a service we all need and I don’t see that need going away. During the last few years there has been a lot of consolidation and pricing pressures in the industry but this seems to have run its course. Industrial output decreases have also meant a decrease in industrial waste. Now that there are fewer competitors and an inkling that industrial output is about to return, this industry should benefit from an increase in revenue.
Please look at the chart provided by Barchart of recent price momentum vs. its 20, 50 and 100 day moving averages and see if you agree:
Waste Connections, Inc., is an integrated solid waste services company that provides solid waste collection, transfer, disposal, and recycling services. The company also offers intermodal services, including repositioning, storage, maintenance, and repair of cargo containers for international shipping companies for the rail haul movement of cargo and solid waste containers in the Pacific Northwest. In addition, it provides container and chassis sales and leasing services to its customers.
Further, the company offers residential, commercial, and industrial solid waste collection services; and provides recycling services for various recyclable materials, including cardboard, office paper, plastic containers, glass bottles, and ferrous and aluminum metals. Its transfer stations receive, compact, and load solid waste to be transported to landfills via truck, rail, or barge.
As of December 31, 2010, the company owned or operated a network of 135 solid waste collection operations, 54 transfer stations, 39 recycling operations, 44 active landfills, and 7 intermodal facilities, as well as one exploration and production waste treatment and disposal facility. It serves approximately two million residential, commercial, and industrial customers from a network of operations in 27 states in the United States. The company was founded in 1997 and is based in Folsom, California. (Yahoo Finance profile)
Barchart technical indicators:
- 88% Barchart technical buy signal
- Trend Spotter buy signal
- Trades above its 20, 50 and 100 daily moving averages
- Up in 5 of the last 5 sessions and increased in price 11.84% last week
- The Relative Strength Index is 66.72% and rising
- Barchart computes a technical support level at 33.47
- Recently priced at 34.66 which is above its 50 day moving average of 32.09
Fundamental factors to consider:
- Wall Street brokerage analysts have projected sales will grow by 13.80% this year and another 8.80% next year
- Earnings are expected to increase by 16.00% annually over the next 5 years
- Based on these projections brokerage analysts have issued 3 strong buy, 3 buy, 1 hold and no negative or under perform recommendations on this stock
- These recommendations look good to me because this stock has enjoyed an extremely high price growth persistence as well and an above average earnings predictability and price stability in the past.
General investor interest:
- I measure the individual investors pulse by looking at how they express their opinions on Motley Fool and 149 readers have voted 97% this stock to beat the market
- The more experienced and savvy All Stars voted 100% for the same result
- Of the financial columnist Fool follows the last 6 articles on the stock have all been positive
Summary: I like the environmental disposal industry and think Waste Connections will be a player there in the next year. Since it has begun to benefit from some of the cost savings of recent acquisitions and consolidations investors have experienced a 28% total return over the last year. Going forward at today’s price I think an annual total return of 11% – 13% over the next 5 years will be more realistic.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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