Caxton Associates (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) both established a position in Waste Management (WM, Financial) during the third quarter.
Waste Management has a market cap of $31.51 billion, a price-earnings ratio of 28.50, an enterprise value of $40.76 billion, a price-book ratio of 5.88, a price-sales ratio of 2.39, a quick ratio of 0.83 and a dividend yield of 2.3%.
Waste Management began its operations when entrepreneur Wayne Huizenga started a garbage hauling business in Fort Lauderdale, Florida. Huizenga began the company with a single truck in 1968.
Waste Management became a Fortune 500 company in 1998. It has since expanded operations to become the largest non-hazardous waste collection and disposal company in the United States and Canada.
Waste Management owns or operates 249 landfill sites, 297 transfer stations, 104 recycling facilities and 122 landfill gas-to-energy facilities.
The company is also North America’s largest residential recycler. Waste Management currently handles upwards of 15 million tons of recyclables in a single year. The company’s goal is to manage 20 million tons of recyclable material by 2020.
As of Dec. 31, 2015, Waste Management had approximately 40,600 full-time employees.
According to GuruFocus, Waste Management has a 5 of 10 financial strength rating with an an equity-asset ratio of 0.26 and an interest coverage ratio of 5.85. The Altman Z-Score of 2.59 indicates the company is in the grey zone, suggesting the company is in some sort of financial stress.
Waste Management also has a 7 of 10 profitability and growth rating with an operating margin of 16.28%, a net margin of 8.36%, a return on equity (ROE) of 21.18%, three-year revenue growth of -1.10% and three-year EPS growth of -2.10%.
Caxton Associates and Jones may have decided to establish a position in Waste Management for the following reasons:
- The company continues to gain momentum with its strong balance sheets.Ă‚ The company has increased its revenue by 4%, its EPS without NRI growth by 7.30%, its free cash flow growth by 13.90% and its book value growth by 3.40% over the past 12 months.Ă‚ The company is gaining momentum and nearly tripled its free cash flow from $157 million in December 2015 to $436 million in June 2016.
- Dividend yield.Ă‚ The company has paid a dividend for 18 consecutive years while increasing its dividend yield 14 years in a row.
- Renewable energy. Waste Management’s tagline is “Think Green.” The company uses landfill-gas as a renewable source of energy, which is endorsed by the Environmental Protection Agency as an alternative to fossil fuels like natural gas, coal and oil. Waste Management produces over 550 megawatts of electricity, which is enough to power more than 440,000 homes. This amount of energy is equivalent to offsetting over 2.2 million tons of coal per year. According to the company's website, recycling one aluminum can run a TV for two hours, power a computer for three hours and light a 100 watt lightbulb for twenty hours.
- Experience.Ă‚ The company is established with nearly 50 years of experience.
Below is a Peter Lynch chart for Waste Management that shows it is currently trading above its intrinsic value.
Since Caxton Associates and Jones purchased their stakes in Waste Management, the stock has gained an estimated 9%.
Disclosure:Ă‚ Author does not own any shares of this company.
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