June 14th, 2008
Barely two months ago I wrote a positive column about Allied Waste (AW), saying:
“After underperforming its peers Waste Management (WMI) and Republic Services (RSG) for the last few months, Allied Waste (AW) looks poised for a rebound. On the basis of my valuation, I believe the shares are worth $14 to $14.50, or about 25 to 30% higher than the current price.”
Republic’s $15 + bid for Allied late Friday got them there pretty quickly. The shares rose 31.9% since the time I wrote the article, compared to a decline of 0.9% in the S&P 500.
When it comes to acquisition offers - particularly those based on a stock purchase rather than cash - I have a take the money and run mentality.
Case closed.
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
May 15th, 2008
What did Jim Cramer call “the Tony Soprano stock”?
But Tony Soprano’s official title was “waste-management consultant.” Therefore, waste management is a recession-proof business.OK, admittedly there are some gaping holes in that formula. But that doesn’t mean Waste Management (WMI) the company, isn’t “fairly recession-resistant,” CEO David Steiner told Cramer Tuesday.
Personally, I have expressed a preference for Allied Waste (AW).
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.
May 1st, 2008
Allied Waste Industries, Inc. (AW), the nation’s second largest waste services company, today reported financial results for its first quarter ended March 31, 2008. For the quarter, income from continuing operations was $72.6 million, or $0.17 per diluted share, inclusive of net charges of $0.03 per share, primarily associated with an asset impairment charge for an expanded closure plan at a Midwest landfill.
Four short weeks ago I said Allied looks much cheaper than its peers, trading at 1.15 times book value compared with 2.9 times for Waste Management and 4.2 times for Republic. Allied stock has challenged the $14 mark several times over the last five years. I believe it is due for another run at that level; that would require nothing more than meeting estimates and a modest increase in the price/book ratio to about 1.3 times. A free cash flow yield of 7% (the average of its peers) would also support a $14.50 share price.
Since that time, the stock has risen 14.6%, compared with a 1.6% rise in the S&P 500. At that rate, it should be challenging the $14.00 price target in no time.
Disclosure: At time of publication, William Trent holds no financial position in the companies mentioned in this article.
April 7th, 2008
My latest column is up at RealMoney.
I think Allied Waste (AW) compares favorably to peers Waste Management (WMI) and Republic Services (RSG).
All three companies are expected to grow their earnings by about 11% per year over the next five years. However, Allied looks much cheaper than its peers, trading at 1.15 times book value compared with 2.9 times for Waste Management and 4.2 times for Republic.
Allied could achieve double-digit annual growth in its share price over the next ten years simply by expanding its price/book ratio to the level of Waste Management’s. If the company also manages to grow at the expected 11% per year, the total return could prove impressive indeed.
Allied stock has challenged the $14 mark several times over the last five years. I believe it is due for another run at that level; that would require nothing more than meeting estimates and a modest increase in the price/book ratio to about 1.3 times. A free cash flow yield of 7% (the average of its peers) would also support a $14.50 share price.
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned.
