Waste Connections (WCN)
Industrial / Servicios ambientales
Third-largest solid waste operator in North America, with a moat built on landfill permit scarcity and exclusive franchise contracts, compounding value through continuous tuck-in acquisitions; it currently trades at an entry multiple well above the sector's historical band, which requires reading the verdict with that discount already on the table.
- Price
- $165.93
- Intrinsic value (5y, base)
- $145
- Total annual return (5y)
- -1.5%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- Third-largest solid waste operator in North America, with a deliberate strategy of low-competition secondary and rural niches instead of major metropolitan areas.
- Moat supported by 114 owned or operated landfills (average remaining life ~31 years) and multi-year exclusive franchise agreements/certificates, with tuck-in acquisitions as a continuous growth engine (19 in 2025 for US$966.8M).
- The current entry multiple (EV/EBIT ~27-31×) trades well above the waste archetype band (15-20×), so the Overvalued verdict reflects multiple compression, not business weakness.
Intrinsic value — two valuation methods
Total return at 5 years: -1.5%/year = -2.7% appreciation + 1.2% dividend. The target price ($145) is ex-dividend; the $9 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $95 · Multiples $125) is below the market price ($166).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $166 trades ~33.2% above its value discounted to today (~$125); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$78.
Thesis
The business
An essential physical infrastructure business with a moat supported by landfill permit scarcity and long-duration exclusive contracts, compounding value through a combination of disciplined pricing, active volume management, and continuous tuck-in acquisitions in a still-fragmented sector. Business quality is high, but return on invested capital sits structurally below the 10% bar because invested capital carries decades of acquisition goodwill — a pattern characteristic of the serial acquirer, not a sign of operational mediocrity.
The valuation
Valued on EV/EBIT over normalized EBIT (excluding periodic remeasurement charges on the landfill closure liability, which the company itself reconciles out of adjusted EBITDA). The base terminal exit multiple is 17×, in the middle of the waste archetype band (15-20×). The 5-year value in the base case is $145, versus a market price of $166 — the resulting compound return is -1%.
The margin of safety
No margin of safety: the price already discounts a demanding scenario. The current entry multiple (EV/EBIT ~27-31× on normalized TTM EBIT) is well above the archetype's 15-20× band, so a large part of the expected return depends on that multiple holding, not on compressing toward the terminal — the opposite of what Graham's margin of safety requires.
What to watch
The central disconfirmer is whether the market remains willing to pay an EV/EBIT multiple well above the sector's historical band — something that only holds if acquisition-driven growth accelerates durably, or if the market is actually valuing on EV/EBITDA (which ignores capex, and there the ~16× TTM multiple looks far more reasonable). Also watch the pace of debt-financed buybacks (a record US$614.5 million in the first half of 2026) and whether landfill closure and post-closure charges stabilize or keep surprising to the upside as at Chiquita Canyon.
Educational / informational. Does not constitute investment advice.