Shares of Republic Services, Inc. RSG hit a 52-week high of $44.96 during yesterday’s trading session, before closing a notch lower at $44.85. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals to drive it upward. The stock is currently trading at a forward P/E of 21.6x and has long-term earnings growth expectation of 5%.
Growth Drivers
Republic Services is the second largest domestic non-hazardous solid waste company in the U.S. The company is currently focusing on a series of quality acquisition opportunities, primarily of recycling assets, which are likely to act as a catalyst for healthy long-term growth within its top 25 markets.
Republic Services is also rationalizing its cost structure, improving the revenue quality and seeking growth through profitable investment opportunities. The company is increasing its operational efficiency by switching over to compressed natural gas collection vehicles and swapping rear-loading trucks with automated-side loaders, which will reduce costs and improve profitability.
At the same time, Republic Services continues to generate significant free cash flow which is utilized for increased dividend payments, share repurchases and strategic acquisitions. Over the years, the company has returned significant cash to its shareholders as dividends and share repurchases. In the last reported quarter, management approved a $900 million increase to its existing share repurchase authorization and extended the term through Dec 31, 2017. The company has historically retained a conservative balance sheet with a healthy liquidity position.
These strategic steps might have boosted investor confidence, catapulting the shares to a new 52-week high.
Stocks to Consider
Some better-ranked stocks in the space include Waste Connections Inc. WCN, Waste Management, Inc. WM and EnPro Industries, Inc. NPO, each carrying a Zacks Rank #2 (Buy).
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