DCF Studio

    WCN.TO · TOR · Industrials

    Waste Connections, Inc.

    Also onConsensus Drift

    Implied value per share

    CAD 173.94

    Market price

    CAD 217.45

    Implied upside

    -20.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Current EV/EBITDA of 20.9x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    CAD 173.94-20.0%
    Exit multiple
    CAD 372.75+71.4%
    Market price
    CAD 217.45

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.4bnUSD 11.3bnUSD 12.4bnUSD 13.6bnUSD 14.9bn+9.5%
    EBITUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.8bn+9.5%
    NOPATUSD 1.5bnUSD 1.6bnUSD 1.8bnUSD 2.0bnUSD 2.2bn+9.5%
    Add depreciation & amortisationUSD 1.3bnUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.9bn+9.5%
    Less capital expenditureUSD -1.3bnUSD -1.4bnUSD -1.5bnUSD -1.7bnUSD -1.8bn+9.5%
    Less increase in working capitalUSD -209.6mUSD -229.5mUSD -251.2mUSD -275.1mUSD -301.2m+9.5%
    Free cashflow to firmUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.8bnUSD 2.0bn+9.5%
    Discount factor0.96990.91230.85820.80720.7593-
    Present valueUSD 1.3bnUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.5bn+3.0%
    Present Value Of The ForecastUSD 7.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.648Reported 0.474, pulled toward 1.0 (Blume)
    Cost of equity6.86%Risk-free + beta x equity risk premium
    Cost of debt3.82%Interest expense / average total debt
    Market capitalisationUSD 54.7bn85.7% of capital
    Total debtUSD 9.1bn14.3% of capital, book value as a proxy
    Tax rate21.4%Effective, capped at statutory
    WACC6.31%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 124.41

    83% of EV

    Forecast FCFF, final year
    USD 2.0bn
    Capex at depreciation, working capital in reinvestment
    USD 2.4bn
    Less reinvestment at g/ROIC (30.6% of NOPAT)
    USD -738.5m
    Capitalised
    USD 1.7bn
    ROIC (reported)
    8.2%
    Terminal value, undiscounted
    USD 45.0bn
    Terminal value, discounted
    USD 34.2bn
    Enterprise value
    USD 41.2bn
    Less net debt
    USD 9.1bn
    Equity value
    USD 32.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 266.59

    91% of EV

    Terminal value, undiscounted
    USD 93.3bn
    Terminal value, discounted
    USD 70.8bn
    Enterprise value
    USD 77.9bn
    Less net debt
    USD 9.1bn
    Equity value
    USD 68.8bn

    Spread between methods: 73%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.31%221.23251.01296.99377.72557.59
    5.31%153.65164.91180.01201.44234.48
    6.31%114.20118.76124.41131.62141.26
    7.31%88.3590.0091.9194.1696.89
    8.31%70.4370.8271.2171.6072.00

    Outlined: this model. Green text: above today's price of 155.52. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year9.5%14.0%+4.5pp
    EBIT margin18.5%22.3%+3.9pp
    Discount rate6.3%5.7%-0.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.