Waste Connections Inc scores 53 for management and 78 for moat. The management score rests on a return on invested capital of 6.8% and a gross margin of 39.0% — figures that describe returns closer to the cost of the capital behind them. Debt sits at 1.14x equity. The solid moat and mixed management are not the same judgement, and the gap between them is where the argument about this business sits.
Three independent anchors set the price worth paying. Growth is modelled at 11.8% a year, below the 12.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 23.6x. That produces an intrinsic value of $73.23, a 10-CAP price of $79.16 and a payback time price of $107.96, with the value zone set at the highest of the three, $107.96. Today's price of $150.66 is 40% above it.
The price is above the value zone and the business scores 78 for moat and 53 for management. Neither test argues for paying up here.
| Price | $150.66 |
| Market cap | $38.0B |
| P/E ratio | 36.5x |
| Return on invested capital | 6.8% |
| Gross margin | 39.0% |
| Debt to equity | 1.14x |
| Free cash flow yield | 2.7% |
| Growth rate used | 11.8% |
| Growth rate measured | 12.0% |
| Exit multiple assumed | 23.6x |
| Company | Moat | Buy price |
| Ferrovial SE (FER) | 69 | $56.45 |
| Old Dominion Freight Line (ODFL) | 55 | $61.58 |
| United Airlines Holdings (UAL) | 55 | $215.31 |
| Paychex Inc. (PAYX) | 80 | $73.39 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Waste Connections Inc rather than accepting ours.