Waste Management ( NYSE: WM ) on Friday was assigned an investment rating of Buy in new research coverage by analysts at Citibank. They said the waste hauler is poised to benefit from sales of biomethane, which is often called renewable natural gas, captured at landfills.
“While we acknowledge 2022 stock outperformance, the renewable natural gas opportunity is still underappreciated,” Bryan Burgmeier, analyst at Citibank, said in a January 6 report. “Through resilient free cash flow generation, Waste Management ( WM ) can also continue to drive operational improvements.”
Waste Management’s ( WM ) stock has declined 5.5% in the past 12 months, compared with a 19% slump for the Standard & Poor’s 500 stock index ( SP500 ). On Friday, the shares rose 1.5% to $156.25 by 9:45 a.m. ET.
Citibank set a price target of $183 a share for Waste Management ( WM ) based on a multiple of 15 times next-12-month EBITDA, compared with an all-time high multiple of 15.2 times and a five-year average of 10.8 times. The target also is 29.1 times estimated EPS for 2023, compared with a high of 30 times and a five-year average of 21.7 times.
“We value Waste Management ( WM ) at a premium to its historical averages, as internal organic growth is poised to accelerate through investments in whitespace areas (renewable natural gas) and internal operations improvement (recycling),” according to Citibank.
Waste Management ( WM ) is the biggest operator of landfills in North America. The company last year said it would invest $825 million over four years to convert methane from garbage dumps into biomethane.
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Waste Management rated Buy in new coverage by Citibank