Casella Waste Systems

Casella Waste Systems Inc receives a 5-star quantitative star rating, indicating our belief that this share class offers a compelling opportunity for investors. The stock currently trades at a 10% discount to our quantitative fair value estimate of $92.71 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's solid growth bolsters our estimated fair value. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. Reflecting the firm's growth is its revenue 3-year growth of 21.9%, which ranks in the top 20% compared with global peers. Robust trailing three-year revenue growth portends a favorable future trajectory, which contributes to our view that shares are undervalued.

On a different note, the firm's lack of profitability is potentially concerning. Companies with low profitability are often less resilient in recessions and are likely to generate weaker future cash flows for shareholders. The firm's earnings yield of 1.6%, a core component of profitability, falls in the bottom 40% compared with peers globally. The earnings generated by the company relative to its share price is concerning, which, despite our favorable price/fair value ratio, is a negative attribute.

The company's narrow quantitative moat rating indicates it could outearn its cost of capital and maintain robust margins for 10 years or longer. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.