WM stock has fallen about 10% from its recent peak. That sell-off has come even though the leading waste management company is having another solid year. The company's revenue rose 5.5% in the second quarter, while its underlying earnings jumped 10.3% due to continuing margin expansion (its margin hit 30% for the first time ever).
The company has also made excellent progress on its strategic expansion plan. It spent over $750 million in the first half of the year growing its solid waste collection business via a string of strategic acquisitions, adding several new geographies while also expanding in some of its growth markets.
WM also continues to expand into adjacent areas to its core business to drive more growth. It recently opened two upgraded recycling facilities and is building several renewable natural gas projects. Meanwhile, it agreed to acquire leading medical waste services provider Stericycle for $7.2 billion, which should be an accretive deal for shareholders.
The company's growing cash flow will give it more money to return to shareholders. While WM plans to pause share repurchases over the next 18 months while it repays debt related to the Stericycle deal, it should continue increasing its dividend.
WM operates such a stable business that it rarely goes on sale. Because of that, the recent 10% discount in its share price looks like a compelling long-term buying opportunity. However, I'd like to see an even bigger discount before I buy more shares, with my target to buy them if they fall below $185.
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