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Why is Waste Management is getting such a high valuation?


musicgold
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Hi,

 

I was looking at WM's historical cash flows and noticed the following:

 

1. Revenue, EBITDA, FCFE, and EPS have grown between 1% and 3% per annum over the last 10 years.

2. Average ROE -10 yrs  =  9%

3. Avg. Return on Capital Employed (Greenblatt) = 18%

4. While the capital employed (including or excluding intangibles and goodwill) has remain unchanged, EBIT has grown 2% over the 10-year period.

5. The company spends 60% of its FCFE in dividends and 30% in stock buybacks, and the rest in acquisitions.

 

Now when I look at its valuation using a 10-year DCF model, the current price seems to imply 9% annual growth in FCFE.

 

What do you attribute to such a high premium to a non-growth business, institutional following?

 

Thanks

 

 

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