Has Republic Services Stock Run Too Far After Its Five Year 140% Surge?

• Wondering if Republic Services at around $212 a share is still worth buying after that long run up, or if most of the upside is already priced in, you are not alone.
• The stock has slipped about 2.0% over the last week but is still up 2.1% over the past month, 6.3% year to date and 140.1% over five years. That naturally raises questions about how much future growth is already embedded in the price.
• Recent moves have come against a backdrop of steady contract wins, long term municipal agreements and ongoing investment in recycling and renewable natural gas projects, all of which support a durable cash flow story. At the same time, investor attention on defensive, infrastructure like names has ebbed and flowed with interest rate expectations, shaping how the market is currently valuing predictable earnings streams like Republic's.
• On our framework, Republic Services scores a 3/6 valuation score, suggesting it screens as undervalued on some metrics but not others. In the sections that follow we will unpack those methods, then finish with a more holistic way to think about what the stock is really worth.

Republic Services delivered 0.0% returns over the last year. See how this stacks up to the rest of the Commercial Services industry.

Approach 1: Republic Services Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and discounting those cash flows back to today in $ terms.

For Republic Services, the model starts with last twelve month free cash flow of about $2.47 billion and applies a 2 stage Free Cash Flow to Equity approach, using analyst forecasts for the next few years and then extrapolating beyond that. On this basis, free cash flow is projected to rise to roughly $4.47 billion in 2035, with growth slowing over time as the business matures.

When all these projected cash flows are discounted back to today, Simply Wall St estimates an intrinsic value of about $261.59 per share. Compared with a current share price around $212, the DCF implies the stock is trading at roughly an 18.7% discount to its estimated fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Republic Services is undervalued by 18.7%. Track this in your watchlist or portfolio, or discover 935 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Republic Services.

Approach 2: Republic Services Price vs Earnings

For profitable, relatively mature businesses like Republic Services, the Price to Earnings (PE) ratio is a practical way to gauge whether investors are paying a reasonable price for each dollar of current earnings. It naturally ties valuation to the company’s ability to generate profit today, while still reflecting the market’s view on its future.

In general, faster growing and lower risk companies warrant a higher, or premium, PE multiple. Slower growth or higher uncertainty usually justify a discount multiple. Republic Services currently trades on about 31.25x earnings, above the broader Commercial Services industry average of roughly 22.82x but below the peer group average of around 47.37x. That mix suggests investors already recognise its quality and resilience, but are not assigning the same premium as to the fastest growing names in the space.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE multiple a company should trade on given its earnings growth profile, margins, industry, market cap and risk factors. For Republic Services, this Fair Ratio is around 31.30x, almost identical to where the stock currently trades. That close alignment indicates the shares look fairly valued on an earnings multiple basis rather than clearly cheap or expensive.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Republic Services Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of a company’s story with the numbers behind its future revenue, earnings, margins and, ultimately, fair value.

A Narrative is your own investment storyline for Republic Services, where you spell out what you think will happen to its business, translate that view into a forward looking financial forecast, and then see what fair value those assumptions imply today.

On Simply Wall St, millions of investors build and share Narratives on the Community page, making it easy to explore different perspectives, compare implied fair values to the current share price, and decide whether a stock looks like a buy, hold or sell based on your own assumptions.

Because Narratives are dynamically updated as new information arrives, like earnings, guidance changes or labor contract news, your fair value view keeps evolving alongside the business rather than staying frozen at a single point in time.

For Republic Services, for example, one investor might build a bullish Narrative that supports a fair value near $290 while a more cautious investor could land closer to $189, and seeing that spread can help you calibrate where your own expectations sit on that spectrum.

Do you think there's more to the story for Republic Services? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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