Critical Analysis: Stericycle (SRCL) versus Waste Connections (NYSE:WCN)

Waste Connections (NYSE: WCN) and Stericycle (NASDAQ:SRCL) are both mid-cap business services companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, earnings, risk and institutional ownership.

Risk & Volatility

Waste Connections has a beta of 0.23, indicating that its share price is 77% less volatile than the S&P 500. Comparatively, Stericycle has a beta of 0.13, indicating that its share price is 87% less volatile than the S&P 500.

Dividends

Waste Connections pays an annual dividend of $0.38 per share and has a dividend yield of 0.6%. Stericycle does not pay a dividend. Waste Connections pays out 32.1% of its earnings in the form of a dividend. Waste Connections has increased its dividend for 7 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings for Waste Connections and Stericycle, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Waste Connections 0 1 9 1 3.00
Stericycle 3 5 6 0 2.21

Waste Connections presently has a consensus price target of $70.24, indicating a potential upside of 10.41%. Stericycle has a consensus price target of $80.83, indicating a potential upside of 14.33%. Given Stericycle’s higher probable upside, analysts plainly believe Stericycle is more favorable than Waste Connections.

Institutional and Insider Ownership

61.2% of Waste Connections shares are held by institutional investors. Comparatively, 94.6% of Stericycle shares are held by institutional investors. 0.7% of Waste Connections shares are held by company insiders. Comparatively, 3.3% of Stericycle shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Waste Connections and Stericycle’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Waste Connections 7.11% 9.19% 4.59%
Stericycle -0.07% 14.35% 5.79%

Earnings and Valuation

This table compares Waste Connections and Stericycle’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Waste Connections $4.40 billion 3.81 $1.37 billion $1.18 53.76
Stericycle $3.61 billion 1.67 $777.58 million ($0.26) -271.92

Waste Connections has higher revenue and earnings than Stericycle. Stericycle is trading at a lower price-to-earnings ratio than Waste Connections, indicating that it is currently the more affordable of the two stocks.

Summary

Waste Connections beats Stericycle on 12 of the 18 factors compared between the two stocks.

About Waste Connections

Waste Connections, Inc. is a solid waste services company in North America. The Company provides waste collection, transfer, disposal and recycling services in markets in the United States and Canada. The Company operates through six segments: Southern segment, Western segment, Eastern segment, Canada segment, Central segment and E&P segment. Through its R360 Environmental Solutions subsidiary, it also provides non-hazardous exploration and production, or E&P, waste treatment, recovery and disposal services in various natural resource producing areas in the United States. It also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. As of December 31, 2016, it served residential, commercial, industrial and exploration and production (E&P) customers in 40 states and the District of Columbia in the United States and five provinces in Canada.

About Stericycle

Stericycle, Inc. is a business-to-business services provider. The Company focuses on regulated and compliance solutions for healthcare, retail, and commercial businesses. The Company’s segments include Domestic and Canada Regulated Waste and Compliance Services (RCS), Domestic Communication and Related Services (CRS), International RCS and All other. The Domestic and Canada RCS and International RCS segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through its Steri-Safe and Clinical Services programs, and other regulatory compliance services. The Domestic CRS segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns and quality audits.

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