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07-Apr-08
AW: Allied Waste Looks Like Trader’s Treasure
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.
Posted at 13:09 in External Blog | Permalink | Comments () | Top
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