Wondering whether Republic Services at around US$209.79 still offers value, or if the easy gains are behind it? This breakdown will help you frame that question clearly.
The stock is roughly flat year to date at a 0.2% decline, with a 1.0% gain over the last week, a 2.8% decline over the last month and a 12.9% decline over the past year, alongside longer term returns of 50.2% over 3 years and 110.4% over 5 years.
Recent coverage of Republic Services has focused on how its share price has softened over the last 12 months after a strong multi year run, prompting questions about whether expectations had become too optimistic. At the same time, some investors see the long term track record as a potential anchor for sentiment despite the recent pullback.
Simply Wall St currently gives Republic Services a valuation score of 2 out of 6. The rest of this article will walk through what different valuation methods say about that score and point to a more complete way to think about value at the end.
Approach 1: Republic Services Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes the cash Republic Services is expected to generate in future years and then discounts those amounts back to today to estimate what the business could be worth right now.
For Republic Services, the latest twelve month free cash flow is about $2.42b. Analysts and model estimates project free cash flow rising to around $3.37b by 2030, with a detailed 2 Stage Free Cash Flow to Equity model used to map the path from today to that future level. Earlier years draw on analyst inputs, while cash flows further out are extrapolated by Simply Wall St based on those estimates.
Pulling all of those projected cash flows together and discounting them back to today gives an estimated intrinsic value of about $241.95 per share. Compared with the current share price of roughly $209.79, the model suggests the stock trades at around a 13.3% discount, which indicates undervaluation in this DCF view.
Result: UNDERVALUED
Approach 2: Republic Services Price vs Earnings
For a profitable company like Republic Services, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. A higher P/E usually reflects stronger growth expectations or lower perceived risk, while a lower P/E can point to more muted growth expectations or higher risk.
Republic Services currently trades on a P/E of about 30.30x. That sits above the Commercial Services industry average of roughly 23.15x, but below the peer average of around 37.19x. On the surface, the stock is priced at a premium to the broader industry and at a discount to closer peers.
Simply Wall St also provides a “Fair Ratio” for Republic Services, which is the P/E multiple it would expect given factors like earnings growth, industry, profit margin, market cap and key risks. This Fair Ratio is 25.51x and is designed to be more tailored than a simple comparison to industry or peer averages because it adjusts for company specific characteristics rather than just grouping businesses together.
Comparing the current P/E of 30.30x with the Fair Ratio of 25.51x suggests Republic Services trades above this model based estimate of fair value.
Result: OVERVALUED
Upgrade Your Decision Making: Choose your Republic Services Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as a simple way for you to attach your own story about Republic Services to the numbers by linking your view of its future revenue, earnings and margins to a forecast, a fair value, and then comparing that fair value with the current share price. This can all be done within an easy tool on Simply Wall St’s Community page that updates automatically when new information such as news or earnings is added. For example, one investor might build a Republic Services Narrative that leans toward the higher analyst price target of US$270 because they focus on recycling automation, renewable natural gas projects and acquisitions in the recent commentary, while another might align closer to the US$200 lower target because they put more weight on risks like softer volumes, trade uncertainties and execution around the US$1b acquisition plan.
