WM Q1 Earnings Beat Fails to Justify Rich Valuation

What happened

WM reported Q1 2026 revenue of $6,227 million, up 3.5% year-over-year, with income from operations rising to $1,113 million from $1,013 million. Operating EBITDA reached $1,848 million, reflecting continued margin expansion from inflation-linked contracts and operational efficiencies. However, the DeepValue report highlights that the stock trades at ~34.5x P/E and ~17.3x EV/EBITDA, roughly 200% above a conservative DCF estimate. Elevated leverage (net debt/EBITDA of 3.64x) and integration risks from Stericycle further erode margin of safety. While the core business remains solid, the current price already prices in optimistic growth assumptions.

Implication

WM's stable cash flows and landfill moat are high quality, but at these multiples, upside is limited. Wait for deleveraging or a pullback to build a position with a reasonable margin of safety.

Thesis delta

The earnings beat reinforces WM's solid operational performance and pricing power, but does not alter the fundamental tension between quality and valuation. The POTENTIAL SELL stance is maintained as the stock still trades well above intrinsic value, with execution risks from Stericycle and sustainability investments overhanging.