Is WM Stock Worth Buying as Margins Rise but Valuation Stays Rich?

Waste Management, Inc. WM combines a defensive waste-services franchise with improving profitability and rising cash generation. Second-quarter execution held up despite softer Collection and Disposal volumes, helped by pricing and operating efficiencies.

The question is whether that quality justifies a premium valuation while debt and near-term liquidity remain constraints. Investors must weigh durable earnings growth against the price already reflected in the shares.

WM’s Pricing Power Keeps Profitability Moving Higher

WM’s second-quarter core price increased 5.7%, while Collection and Disposal yield improved 3.6%. Those gains helped offset a 1.8% decline in Collection and Disposal volume, partly reflecting the prior-year wildfire cleanup comparison.

Adjusted operating EBITDA rose 5.5% year over year to $2.07 billion, and the adjusted margin expanded 40 basis points to 30.9%. Excluding the prior-year wildfire contribution, adjusted operating EBITDA growth was 9.1%.

Waste Management Has More Than One Growth Engine

Recycling and renewable energy are adding growth beyond the core collection network. Combined adjusted operating EBITDA from those businesses increased 32.5% year over year as recycling volumes, automation efficiencies and renewable natural gas production improved.

Healthcare Solutions’ operating EBITDA margin reached 19%, up 200 basis points year over year. Cross-selling had generated $32 million of annual operating EBITDA, adding another source of integration benefits.

WM’s Valuation Leaves Less Room for Disappointment

WM trades at 14.3X trailing 12-month enterprise value to EBITDA, above the Zacks sub-industry’s 12.5X and its own five-year median of 15X. It also carries a 25.7X forward price-to-earnings multiple and a PEG ratio of 2.57.

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The premium raises the execution bar. Republic Services, Inc. RSG offers recycling, waste and environmental solutions. Clean Harbors, Inc. CLH provides hazardous and non-hazardous material management and industrial services, giving investors another environmental-services comparison.

Waste Management Still Faces Balance Sheet Pressure

At June 30, 2026, WM had $22.28 billion of long-term debt and $1.08 billion of current debt against $557 million of cash. Current assets of $5.40 billion trailed current liabilities of $5.95 billion, leaving a working-capital deficit and a current ratio of 0.91.

Leverage ended the quarter at 2.96 times, within management’s 2.5-3.0 times targeted range, with a decline expected in the second half. The absolute debt load still reduces flexibility if cash generation weakens or capital needs rise.

WM’s Cash Flow Helps Support the Bull Case

Free cash flow reached $2.02 billion in the first half of 2026, up more than 56% year over year. Operating cash flow increased more than 17% to $3.23 billion, supported by earnings growth and lower capital spending.

That cash generation supports investment and shareholder returns, but competing demands remain. WM repurchased $1 billion of shares and paid $764 million in dividends during the first half while also funding acquisitions and servicing debt.

WM’s Ratings Favor Patience Over Aggressive Buying

WM’s operating quality is evident, but its valuation and balance-sheet constraints argue for patience. Pricing, broader growth platforms and cash flow support the earnings case, while the premium multiple leaves less room for execution setbacks.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Its VGM Score of B, Growth Score of B and Momentum Score of B are constructive, while the Value Score of C is less supportive. The ratings favor a measured stance rather than an aggressive new entry.

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This article originally published on Zacks Investment Research (zacks.com).

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