Waste Management, Inc.WMNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $237.77 per share(market-calibrated)

-2.2%

Upside to Fair Value

Current

$243.07

Pure Model

$237.52

Fair Value

$237.77

Bull Case

$305.41

Bear Case

$186.24

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

2.31%

Calibrated Growth

2.26%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $237.52.

What's Driving This Ratingfor WM

↓

CapEx normalizing toward maintenance

Historical CapEx is 10.99% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$2.7B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 16.94% — below the sector mature average of 18.28%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $6.2B (16.94% margin).

→

Moderate revenue growth

Analyst consensus projects 5.04% revenue growth, fading to 2.25% by Year 10. Revenue reaches $36.7B (vs $25.2B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.31% is close to the model's 2.25% (only 6bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 69.92% indicates efficient cash generation. FCF reaches $6.2B by Year 10 (16.88% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.59

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.14%

Cost of Debt

Pre-tax Cost of Debt2.40%

Tax Rate20.93%

After-tax Cost of Debt1.90%

Equity Weight (E/V)81.04%

Debt Weight (D/V)18.96%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (81.04% × 7.14%) + (18.96% × 1.90%)

= 6.14%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$26.5B	$29.2B	$32.0B	$34.1B	$36.7B
EBIT	$4.5B	$4.9B	$5.4B	$5.8B	$6.2B
Tax	$939M	$1.0B	$1.1B	$1.2B	$1.3B
NOPAT	$3.5B	$3.9B	$4.3B	$4.6B	$4.9B
+ Depreciation	$1.9B	$2.1B	$2.3B	$2.5B	$2.6B
- Capex	$2.9B	$2.7B	$2.5B	$2.0B	$1.3B
- Δ NWC	$127M	$127M	$109M	$100M	$81M
Free Cash Flow	$2.4B	$3.2B	$4.0B	$4.9B	$6.2B
Discount Factor	0.942	0.836	0.742	0.659	0.551
Present Value	$2.3B	$2.6B	$3.0B	$3.2B	$3.4B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.2B

Terminal Growth Rate2.25%

WACC6.14%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$162.7B

PV of Terminal Value$89.6B

Exit Multiple Method

Year 10 EBITDA$8.9B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$159.5B

PV of Terminal Value$87.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$29.6B

PV of Terminal Value$89.6B

Enterprise Value$119.2B

(-) Net Debt$22.7B

Equity Value$96.5B

Shares Outstanding403M

Price per Share$239.70

Exit Multiple Method

PV of Projected FCFs$29.6B

PV of Terminal Value$87.9B

Enterprise Value$117.5B

(-) Net Debt$22.7B

Equity Value$94.8B

Shares Outstanding403M

Price per Share$235.35

Pure Model Fair Value

$237.52

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
4.14%	$337.22	$375.75	$415.46	$396.14	$377.72
5.14%	$262.42	$280.96	$305.89	$341.25	$377.72
6.14%	$213.91	$224.37	$237.52	$254.54	$277.44
7.14%	$178.85	$185.35	$193.19	$202.80	$214.88
8.14%	$151.78	$156.09	$161.14	$167.12	$174.32

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$186.24

-23.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.73

Base Case

$237.52

-2.3% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.59

Bull Case

$305.41

25.6% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.50

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.04%

Year 3 Revenue Growth4.54%

Year 5 Revenue Growth3.52%

Year 7 Revenue Growth3.01%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin16.94%

Terminal EBIT Margin18.28%

Tax Rate20.93%

Historical Capex / Rev10.99%

Terminal Capex / Rev3.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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