On the four Ms, Waste Management Inc. earns 69 for management and 86 for moat. The management score rests on a return on invested capital of 8.9% and a gross margin of 29.1% — figures that describe a business earning a respectable return on what it employs. The balance sheet carries debt at 2.29x equity, which magnifies both the returns above and the risk beneath them. The wide moat and strong management are not the same judgement, and the gap between them is where the argument about this business sits.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 10.6% a year, below the 11.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 21.2x. That produces an intrinsic value of $101.65, a 10-CAP price of $110.49 and a payback time price of $142.95, with the value zone set at the highest of the three, $142.95. Today's price of $201.90 is 41% above it.
The operating figures describe a business performing at a high level; the price asks for that performance to continue and then some. A margin of safety score of 25 is the measure of how little room that leaves for being wrong.
| Price | $201.90 |
| Market cap | $80.7B |
| P/E ratio | 28.6x |
| Return on invested capital | 8.9% |
| Gross margin | 29.1% |
| Debt to equity | 2.29x |
| Free cash flow yield | 3.2% |
| Growth rate used | 10.6% |
| Growth rate measured | 11.0% |
| Exit multiple assumed | 21.2x |
| Company | Moat | Buy price |
| United Parcel Service (UPS) | 19 | $76.47 |
| Bloom Energy Corp- A (BE) | 70 | $32.32 |
| Cintas (CTAS) | 92 | $65.87 |
| CSX Corporation (CSX) | 33 | $28.71 |
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 Management Inc. rather than accepting ours.