Waste Connections' Optimistic Spin Ignores Valuation and Legal Realities

What happened

A Zacks Investment Research article published on December 26, 2025, urges investors to retain Waste Connections stock, citing its EPS growth, acquisition-driven revenue, and rising dividend as it outpaces a struggling industry. The DeepValue master report, however, maintains a HOLD rating, noting that WCN's current valuation of about 35x TTM P/E and 2.8% FCF yield already reflects its stability and growth, limiting upside. Critical risks persist, including the Chiquita Canyon Landfill trial starting October 13, 2025, and PFAS-related regulatory costs, which could materially impair cash flows and operations. Despite strong 2024 performance with adjusted EBITDA up 15% to $2.9 billion and resilient cash generation, these positives are fully priced in, tempering near-term reward. The article's bullish narrative overlooks these overhangs, highlighting the need for a more cautious, analytical approach based on the report's balanced assessment.

Implication

The high P/E multiple suggests limited room for valuation expansion, making the stock vulnerable to negative news or market shifts. Pending litigation at Chiquita Canyon Landfill poses a significant binary risk, with an adverse outcome potentially harming cash flows and investor sentiment. While acquisitions and pricing power support steady growth, integration challenges and regulatory costs like PFAS treatment could erode margins. Robust free cash flow generation and manageable leverage provide some downside protection, but these factors are already baked into the current stock price. Until the legal overhang clears and valuation becomes more attractive, patience is warranted, with a focus on monitoring trial outcomes and cost trends.

Thesis delta

The Zacks article reinforces WCN's growth narrative but does not alter the core thesis from the DeepValue report, as it ignores key risks and valuation concerns. No new catalysts or information are presented that would shift the investment case from hold to buy or sell. Therefore, the thesis remains unchanged: WCN is a high-quality compounder with durable cash flows, but full pricing and legal uncertainties justify a cautious stance.