We came across a bullish thesis on Waste Management, Inc. on Rigatoni Capital’s Substack. In this article, we will summarize the bulls’ thesis on WM. Waste Management, Inc.’s share was trading at $216.18 as of January 13th. WM’s trailing and forward P/E were 34.04 and 25.71 respectively according to Yahoo Finance.
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Waste Management is the largest integrated waste services provider in North America, operating a vertically integrated network of collection routes, transfer stations, recycling facilities, and landfills that creates a significant competitive moat. Waste Management represents a classic defensive business with a durable moat built on recurring revenue, strong pricing power, and steady margin expansion, even though its core trash removal operations offer limited volume driven growth.
Despite this maturity, the company delivered nearly 16% year over year revenue growth, largely driven by price increases and incremental volume gains, highlighting the resilience of its model. More importantly, the market appears to be underappreciating WM’s emerging growth vectors, particularly its renewable energy initiatives. Investments in landfill gas to energy projects and recycling automation are expected to meaningfully expand free cash flow, with Bernstein forecasting a roughly 20% free cash flow CAGR over the next three years, well ahead of peers like Waste Connections and Republic Services. WM generated approximately $2.4 billion in free cash flow over the past year, with management projecting this figure to climb to around $3.8 billion by 2026, supported by declining heavy capex requirements.
The renewable energy segment could become a material earnings contributor as WM captures methane from landfills and converts it into natural gas and electricity, a resource that may become increasingly valuable as energy demand from AI driven data center infrastructure grows.
Bernstein estimates this segment could generate $760 to $800 million in EBITDA by 2027, providing incremental upside that is not fully reflected in current valuations. While concerns around the $7.2 billion Stericycle acquisition likely weighed on sentiment due to integration and recycling commodity risks, shareholder returns remain robust, with a 14.5% dividend increase planned for 2026 and a new $3 billion buyback authorization.
Although the stock trades at a premium multiple, its utility like characteristics, predictable cash flows, and history of extended consolidations followed by sharp reratings suggest attractive long-term risk-reward.
