Here's Why I Think Casella Waste Systems (NASDAQ:CWST) Might Deserve Your Attention Today

By
Simply Wall St
Published
March 13, 2021
NasdaqGS:CWST

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Casella Waste Systems (NASDAQ:CWST). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Casella Waste Systems

Casella Waste Systems's Improving Profits

In the last three years Casella Waste Systems's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Casella Waste Systems's EPS shot from US$0.67 to US$1.87, over the last year. Year on year growth of 178% is certainly a sight to behold.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Casella Waste Systems maintained stable EBIT margins over the last year, all while growing revenue 4.2% to US$775m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:CWST Earnings and Revenue History March 13th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Casella Waste Systems's forecast profits?

Are Casella Waste Systems Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Casella Waste Systems shares worth a considerable sum. Notably, they have an enormous stake in the company, worth US$136m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$2.0b and US$6.4b, like Casella Waste Systems, the median CEO pay is around US$4.9m.

The Casella Waste Systems CEO received US$2.7m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Casella Waste Systems Deserve A Spot On Your Watchlist?

Casella Waste Systems's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think Casella Waste Systems is worth considering carefully. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Casella Waste Systems (at least 2 which don't sit too well with us) , and understanding these should be part of your investment process.

Although Casella Waste Systems certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Promoted
If you decide to trade Casella Waste Systems, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.


This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record. Learn more about the team behind Simply Wall St.