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By: Charlie Maleki, AIM student at
Marquette University
Disclosure: The AIM Equity
Fund currently holds this position. This article was written by myself, and it
expresses my own opinions. I am not receiving compensation for it and I have no
business relationship with any company whose stock is mentioned in this
article.
Summary
•
Casella Waste Systems, Inc. (NASDAQ:CWST)
provides resource management expertise and services to residential, commercial,
municipal and industrial customers mainly in the area of solid waste
collection, transfer, disposal, recycling and organics services.
•
CWST operates in four main business segments: Western, Eastern, Recycling, and
Other. (in order based on % of total revenue).
•
The share price is up ~10% over the past month and has grown ~81% over the past
year.
•
Increased pricing will drive CWST’s internal growth in the coming years. (solid
waste pricing up 4.3%)
•
Management’s acquisition strategy has already yielded positive results and
should be the catalyst for external growth in the future.
•
CWST is a company that I am very high on. They have shown the ability to grow
rapidly over the past year and should continue this trend. I would recommend
investors buy in before the price increases even further.
Key points: On May 3, Casella Waste Systems, Inc.
announced earnings for Q1 2018 showing they had experienced yet another strong
operational quarter. Total revenues for the quarter were $147.5 million, up
$13.7 million or 10.2% from Q1 2017. However, net loss fell to $3.9 million
from $0.2 million net loss in Q1 2017.
Solid
waste pricing for the quarter was up 4.3% which was driven by strong growth in
landfill pricing, up 4.9%, and robust collection pricing, up 4.8%. This pricing
growth was further leveraged by a 6.6% solid waste volume growth, which was
mainly driven by large disposal volume growth.
Due
to China’s ban on mixed paper and new lower contamination standards, commodity
pricing for recycled paper and cardboard continued to deteriorate during Q1
2018.CWST’s average commodity revenue per ton was down ~50% YoY, with mixed
paper pricing down over 90% throughout the same period.
CWST
management has shown determination to grow their company through acquisition or
development investments. As a part of this strategy, the company has
experienced $20 million of acquired revenues over the last four months. CWST’s
acquisition pipeline remains robust and this strategy will continue into the future
creating new growth avenues at all times.
What has the stock done
lately?
Over
the past month Casella Waste Systems, Inc.’s stock is up ~10%. Almost all of
this growth has come over the last week (since April 27th) as CWST
exceeded earnings expectations and provided a positive outlook for the rest of
2018. They have shown that even in an environment of falling commodity prices,
they are able to remain operationally efficient which is a good sign for
investors.
Past Year Performance: CWST has increased ~81% in value over the
past year. The 52 week range is $13.32 - $27.50. This trend of rapid growth
should continue into the future, however, not at quite the same pace.
Source: FactSet
My Takeaway
Even
in an environment of falling commodity prices, Casella Waste Systems, Inc. has
shown an ability to achieve high levels of growth not mirrored by their
competitors. As pricing and volume continue to increase together for CWST, this
rapid growth they have been experiencing should continue further into the future.
Management seems determined to grow not only internally, but externally. If
they continue to be efficient in finding lucrative acquisition options, the
increase in revenue they have experienced over the past four months as a result
should continue into the future. I am very high on CWST’s stock overall and
believe it will continue to provide good returns for investors as they continue
to grow and develop as a company.
Source: FactSet
