HDid you pay attention to the actions of Republic Services (RSG)? Shares were higher, as the stock rose 3.7% in the past month. The stock hit a new 52-week high of $ 128.72 in the previous session. Republic Services is up 33.6% year-to-date from -21% move for Zacks’ business services industry and -2.8% return for pickup services industry Zacks waste.
What drives outperformance?
The stock has an impressive track record of positive earnings surprises, as it hasn’t missed our consensus earnings estimate in any of the past four quarters. In its latest earnings report from July 29, 2021, Republic Services announced EPS of $ 1.09 versus a consensus estimate of $ 0.94.
For the current fiscal year, Republic Services is expected to post earnings of $ 4.06 per share on $ 11.05 billion in revenue. This represents a 14.04% variation in EPS on an 8.84% variation in revenues. For the next fiscal year, the company is expected to earn $ 4.44 per share on $ 11.64 billion in revenue. This represents a year-over-year change of 9.41% and 5.3%, respectively.
Republic Services may be at a 52-week high right now, but what could the future hold for the action? A key aspect of this question is to look at the valuation metrics to determine whether the business should experience a setback from this level.
On this front, we can look at Zacks style scores, as they offer investors a variety of ways to browse stocks (beyond the Zacks rank of a stock). These styles are represented by ratings ranging from A to F in the Value, Growth, and Momentum categories, while there is also a combined VGM score. The idea behind style scores is to help investors choose the most appropriate Zacks Rank stocks based on their individual investing style.
Republic Services has a value score of C. Growth and stock momentum scores are B and D, respectively, giving the company a VGM score of B.
In terms of the distribution of value, the stock is currently trading at 31.7 times the current year’s EPS estimates. On a sliding cash flow basis, the stock is currently trading at 17.9X compared to its peer group average of 13.7X. Additionally, the stock has a PEG ratio of 2.98. This is not enough to put the company in the top echelon of all the stocks we cover from a value perspective.
We also need to look at the Zacks ranking for the stock, as it overrides any trend on the style score front. Fortunately, Republic Services currently has a Zacks rank of # 2 (buy) thanks to rising profit estimates.
Given that we recommend that investors select stocks with the Zacks rank of 1 (strong buy) or 2 (buy) and style scores of A or B, it looks like Republic Services passes the test. So, it looks like Republic Services shares may still be ripe for more earnings to come.
How does Republic Services compare to the competition?
Republic Services shares have gone up and the company still seems like a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including ManpowerGroup (MAN), Concentrix (CNXC) and IQVIA Holdings (IQV), all of which currently have a Zacks rating of at least 2 and a VGM score of at least B, which which makes them well-balanced choices.
The Zacks Industry Rank is in the top 28% of all industries we have in our universe, so it looks like there are some good upwinds for Republic Services, even beyond its own strong fundamental situation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.