Waste Connections Stock Could Struggle to Move Higher

Analyzing post-earnings opportunities for Waste Connections stock

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Waste Connections, Inc. (NYSE:WCN) is down 2.4% to trade at $123.76 at last check. While some broader market headwinds may be to blame for this negative price action, the equity has been moving lower on the charts since April, after the $142 level capped several rallies. The security is today pacing for its seventh-straight daily drop, following last week's first-quarter earnings miss, to trade at its lowest level since early March. 

WCN Intraday

Analysts remain firmly optimistic towards Waste Connections stock. In fact, 11 of the 12 in question call the equity a "buy" or better, while the 12-month consensus target price of $149.74 is a 20.5% premium to current levels. An unwinding of this optimism could push shares lower still. 

The options pits are bearish, however. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.04, which stands higher than 99% of readings from the past year. In other words, short-term traders have rarely been more put-biased towards WCN.

Nonetheless, Waste Connections has generated consistent top- and bottom-line growth in recent years, with the exception of a 64% decrease in net income for 2020. For 2021, WCN reported 13% revenue growth, and 202% net income growth. Waste Connection’s trailing 12-month revenues and net income are also up 30% and 17%, respectively, since 2018.

WCN is estimated to end fiscal 2022 with 14.8% revenue growth, and 17.9% earnings growth. What's more, Wall Street sees revenues rising 8.1%, and earnings 15% in 2023. The company offers a dividend yield of 0.73%, with a forward dividend of $0.92, making it am option for long-term investors, too. However, at its forward price-earnings ratio of 26.04 and a price-sales ratio of 5.16, WCN remains overvalued, despite its relatively high growth expectations.

 

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