Waste Management, Inc (WM): what the price assumes

In the published model solve dated 2026-Q2, anchored at $219.66, Waste Management, Inc (WM) is priced for +5.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/WM

Headline

FieldValue
TickerWM
CompanyWaste Management, Inc
Current price$219.66/sh
CompositionCommercial 22% / Industrial 12% / Residential 14% / Other collection 13% / Landfill 15% / Transfer 6% / Recycling Processing and Sales 6% / Renewable Energy 2% / Healthcare Solutions 10% / Corporate and Other 0%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)5.5%
Operating margin today17.6%
Margin compression (value-band)-12.1pp
Implied growth5.8%
Multiple paid25x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.6% sits below it).

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history+0.25σ
cohort percentile (of 225 peers)67

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.85x5expensive
Earnings2.42x5expensive
Relative3.05x2expensive
Growth1.10x3expensive

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$200.401.10xyesFCF base $3.8B, growth 7% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection
DCF Exit MultipleGrowth$224.270.98xyesExit EV/EBITDA: 11.1x / 13.1x / 15.1x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelativenoP/E 23.23x (blended: static sector reference 20x + trailing (TTM) 31x), scenarios: 19.3x / 23.2x / 27.1x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowthno
Two-Stage DDMGrowthno
Simple Excess ReturnAsset$77.162.85xyesBV/sh $24.83, ROE (TTM) 28.7%, ke 9.3%
Two-Stage Excess ReturnAsset$139.341.58xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$179.801.22xyesRev $25.7B, growth 7% (input: historical growth; tapered), Terminal P/S: 2.8x / 3.4x / 4.0x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$84.722.59xyesEPS $7.06, growth 6% (input: historical EPS growth), PEG=5.20 (Overvalued)
Margin TrajectoryGrowthno
Earnings Power ValueEarnings$79.292.77xyesNormalized EBIT (5y avg op income, one-time charges added back) $3.85B × (1−23%) / WACC 9.2% → EPV (no growth)
Residual IncomeAsset$116.871.88xyesBV $24.83 + 5yr PV of (ROE (TTM) 28.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$62.803.50xyes√(22.5 × EPS $7.06 × BVPS $24.83) — Graham's conservative floor
EV/EBITDA RelativeRelativenoEBITDA $6.74B × sector EV/EBITDA 13.0x
FCF YieldEarnings$95.342.30xyesFCF $3573.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$90.612.42xyesSBC-adj FCF $3.40B (FCF $3.57B − SBC $0.17B) capitalized at Kₑ
Ben Graham FormulaEarnings$120.411.82xyesEPS $7.06 × (8.5 + 2×5.9%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$24.908.82xyesBV $24.83 × (ROIC 9.2% / WACC 9.2%)
P/Sales SectorRelativenoRevenue $25.67B × sector P/S 2.0x
PEG Fair ValueRelative$62.743.50xyesEPS $7.06 × (PEG 1.5 × growth 5.9% (input: historical EPS growth)) → PE 8.9x
Earnings YieldEarnings$76.322.88xyesEPS $7.06 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelativeno
Clinical Phase NPVGrowthno
MertonAssetno
V5 Mechanicalno

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
East Tier (Collection and Disposal)operatingenterprise$9.0b$2.9b operating-incomewithheldunresolved no unit value
West Tier (Collection and Disposal)operatingenterprise$8.7b$2.9b operating-incomewithheldunresolved no unit value
Recycling Processing and Salesoperatingenterprise$1.5b-$80.0m operating-incomewithheldunresolved no unit value
Renewable Energyoperatingenterprise$478.0m$135.0m operating-incomewithheldunresolved no unit value
Healthcare Solutionsoperatingenterprise$2.5b-$88.0m operating-incomewithheldunresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

FieldValue
Net debt$24.4b
Net debt / NOPAT (after-tax)7.06x
Net debt / operating income (pre-tax)5.42x
Share count CAGR (buyback)-0.9%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

The surprising number in Waste Management is the return on equity: 27.9 percent on a book value of just 24.78 dollars per share. That combination, a high return on a thin equity base, is the signature of a business with a structural moat and pricing power, not a capital-hungry industrial. The moat is physical and effectively unrepeatable: permitted landfills cannot be built in modern America at meaningful scale, so the network of disposal sites Waste Management already owns is a scarce asset that competitors cannot replicate. That scarcity translates into pricing power, and the pricing power is contractual. The company structures fees to pass through direct and indirect costs, including an energy surcharge intended to flow through to customers (FY2025 10-K, accession 0001104659-26-012049), which is why margins hold when costs rise. A business that can raise price above inflation, in a service customers cannot forgo, compounds quietly and reliably.

The second surprise is how much optionality sits inside a garbage company. Waste Management earns royalties on landfill gas, including a 15 percent royalty from its Renewable Energy segment on net operating revenue from selling renewable natural gas, renewable identification numbers, electricity, and capacity (FY2025 10-K, accession 0001104659-26-012049). The decomposing waste already in its landfills is being converted into a growing renewable-energy revenue stream at high incremental margin, a free option that the market historically underweighted. Q1 2026 showed the model working: net income rose 13.5 percent to 723 million dollars, operating EBITDA margin improved 200 basis points, and SG&A fell roughly 20 percent year over year as the Stericycle healthcare acquisition was integrated.

The capital-return program turns that durable cash into shareholder value. For 2026 Waste Management raised its dividend 14.5 percent to 3.78 dollars annually, its 23rd consecutive year of increases, and authorized a 3 billion dollar buyback, planning to return roughly 90 percent of free cash flow to shareholders while still funding tuck-in acquisitions. Implied operating growth embedded in the price is a reasonable 6.7 percent a year, well within what a pricing-plus-volume-plus-energy model can deliver. This is the textbook compounder: an irreplaceable asset base, contractual pricing power, a renewable-energy option, and a management team returning nearly all the cash.

Bear Case

The governance and capital-allocation question is where a Waste Management skeptic should focus, because the company is making aggressive promises about cash it has partly borrowed. Management has committed to returning roughly 90 percent of 2026 free cash flow to shareholders through a 14.5 percent dividend hike and a 3 billion dollar buyback, plans about 2 billion dollars of repurchases, and still wants to fund tuck-in acquisitions, all while carrying the debt from the 7.2 billion dollar Stericycle acquisition. Leverage is targeted around 3.1 times after a year of debt reduction. Returning nearly all free cash flow while still leveraged and still acquiring is a confident posture, but it leaves little margin for error: if the Stericycle synergies, targeted at a 300-million-dollar run rate by the end of 2027, come slower than planned, the company is funding its shareholder commitments and its deleveraging from the same finite stream.

The Stericycle deal itself is the capital-allocation item to scrutinize. Buying a medical-waste and document-destruction business for 7.2 billion dollars took Waste Management outside its core solid-waste competency, and large acquisitions into adjacent markets are where disciplined operators have historically destroyed value. The integration is going well so far, with SG&A down and margins up, but the synergy target is a forward promise, and the healthcare-waste market has its own regulatory and competitive dynamics that the core landfill moat does not protect. An acquisition that disappoints would weigh on both the earnings and the balance-sheet flexibility that the buyback assumes.

The valuation leaves no room for any of this to go wrong. The engine's read is unusually blunt: no valuation family reaches the price. The stock is rich on assets, on earnings power, on peer multiples, and even on forward growth, which means the price is a bet beyond what any standard frame supports. A trailing P/E near 34 sits close to a three-year high, and the zero-growth earnings-power value lands far below the price. Q1 2026 revenue of 6.23 billion dollars slightly missed estimates, a reminder that even a steady compounder can disappoint at a premium multiple, and the stock dipped on the print. When a business this good is priced for perfection, the risk is not that the business breaks but that the multiple does, and a premium-priced compounder that returns 90 percent of cash has spent the buffer that might otherwise cushion a re-rating.

Valuation

Waste Management is a high-quality compounder priced like one, and the X-ray is unusually unanimous: every method lands below the current price. The relative-valuation frame comes closest, at a blended P/E near 23 times landing around 207 dollars, just under the 214-dollar price. The growth-DCF reads, on roughly 11 percent historical growth, land in the 160-to-193-dollar range. The asset and earnings-power frames land much lower, with the zero-growth earnings-power value near 65 dollars and the simple excess-return read near 75 dollars, because Waste Management's book value per share of 24.78 dollars is small relative to its earnings, the same thin-equity, high-ROE profile that signals the moat. The engine's plain conclusion is that no family reaches the price, so the stock is a bet beyond what standard frames support.

Inverting the price gives a more forgiving read. At the current level the market is paying about 26 times company-wide operating income, which implies operating growth of roughly 6.7 percent a year for five years. For a business with contractual pricing power, an irreplaceable landfill network, and a growing renewable-energy line, 6.7 percent is achievable rather than heroic, and each one-percentage-point change in the cost of capital moves that implied growth by about 9 points, so read it directionally. The reliability of that solve is reasonable given the steady cash flows.

The honest synthesis is the tension between quality and price. On every static method Waste Management is expensive, because static methods cannot capture the durability of a regulated-scarcity moat. On the forward-growth inversion it is defensible, because the embedded growth is modest for the franchise. The investment question is whether you are willing to pay a premium that no backward-looking frame justifies for a business whose moat is among the most durable in the market. The dividend, raised for 23 straight years to a 3.78-dollar rate, pays you a real return while you hold, but the absence of any valuation floor near the price means the downside in a multiple compression is real. This is a pay-up-for-quality name, and the buyer should know that is the bet.

Catalysts

The near-term catalyst is the Stericycle integration. Waste Management is targeting a 300-million-dollar run-rate synergy by the end of 2027, and Q1 2026 already showed SG&A down roughly 20 percent and operating EBITDA margin up 200 basis points, so each quarter is a read on whether the healthcare-waste acquisition delivers the promised cost and revenue synergies. Progress on deleveraging from the roughly 3.1-times level, and confirmation of the full-year revenue guidance toward the 28.5-to-29.25-billion-dollar 2027 target, are the financial markers that the integration is on track.

The second catalyst is the renewable-energy build-out. Waste Management's landfill-gas-to-energy projects generate renewable natural gas, renewable identification numbers, and electricity, and the ramp of new facilities is a growing, high-margin revenue line whose contribution will become more visible in coming quarters. Capital allocation is itself a recurring catalyst: the pace of the 3 billion dollar buyback and any further dividend action signal management's cash-flow confidence, while the cadence of tuck-in acquisitions shows how the company balances M&A against shareholder returns. Pricing actions across the collection-and-disposal tiers, the engine of margin, are the operating metric to watch given the premium valuation.

Sources: Waste Management posts higher Q1 2026 earnings, stocktitan.net; WM announces 14.5 percent dividend increase and 3 billion buyback, investors.wm.com; Waste Management Q1 2026 EPS beat, investing.com; Waste Management analyst target after best-ever cost performance, tikr.com.

Peer Cohorts (Per Segment, With Filing Citations)

East Tier (Collection and Disposal) / West Tier (Collection and Disposal) (reported)

Recycling Processing and Sales (reported)

Renewable Energy (reported)

Healthcare Solutions (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive WM report on boothcheck