Monday, January 30, 2012

Companies Making Money


Business Link New Year Party by Business Link







Consumers are becoming more and more socially conscious, and want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference in the mind of the consumer.


Often, the added expenses a company incurs from paying workers a little more, monitoring resource sourcing, or going the extra ethical mile are small downsides when compared to the huge potential upside. And where there's company upside, there's investor upside.


Waste Management (NYSE: WM  ) is just such a company. Let's dive deep into the rubbish specialist, evaluate its socially conscious policies and practices, and take a hard look at the numbers. We'll evaluate how it's performing as a business, an investment, and as a socially conscious enterprise.


Thinking outside the landfill
Waste Management probably isn't the first company that pops to mind when you think of a socially responsible enterprise. But the fact is, we humans need to throw things away, and Waste Management is undertaking a series of initiatives and campaigns that think outside the box, and the landfill, regarding exactly what "away" can mean. In addition to traditional recycling of bottles, cans, plastics, etc., the company also offers such innovations as:



  • Electronics recycling, so those old televisions and computers end up being reused rather than becoming a seagull perch in a landfill.

  • Fluorescent bulb and battery recycling, so the dangerous chemicals and components rife in both are safely disposed of.

  • Household hazardous waste disposal, so the paint from that old can of '70s-era burnt orange won't leak into our water supply.

  • Food waste pickup, so if you don't have the room or the inclination to compost, Waste Management will do it for you.


The company also offers specialized disposal and recycling for the manufacturing, health-care, food, and retail sectors. In the construction sector, Waste Management can even help companies meet their LEED certifications.


In the "sustainability" section of the company's website, there's a video with the line: "Instead of thinking about where waste can go, we think about what it can do." That's marketing, of course, but the company backs up its words with actions -- actions that help it turn a nice, tidy profit while doing some good. Now let's take a look at the numbers and see how the business and the stock are performing.


Turning trash into cash
Rubbish collection is as much of a necessity for human civilization as water, sewage, and electricity. Just conjure up images of any of the big-city garbage strikes that have made the news in past years and it will be clear why companies like Waste Management aren't going anywhere, anytime soon. By the numbers for the company:



  • Quarterly revenue grew a healthy 8.9% year over year.

  • Quarterly earnings grew a more-than-healthy 11.5% YOY.

  • The balance sheet holds $282 million in cash, along with $9.68 billion in long-term debt. That's a whole lot of debt versus not very much cash, but at least money is cheap right now, and a company like Waste Management is a cash-generating machine, so it should be able to keep up with debt payments.


Gross margin, a measure of brand strength and pricing power, is a solid 36.6% TTM for Waste Management, but peer Republic Services (NYSE: RSG  ) comes in at a significantly better 40.9% TTM. Somewhere in the very top lines, Republic Services is doing a better job of controlling costs. Waste Management, with a gross revenue of $13.16 billion TTM, verses Republic Services' revenue of $8.19 billion TTM, ought to be able to find greater efficiencies and economies of scale and therefore do better here.


Since 1987, still making money and a difference
Waste Management's share price did take a dive right around the end of July, from about $36 to $28, likely on lowered guidance on waste volume (it didn't help that the whole market tanked then), but has recovered nicely to today's price of $33. The P/E of 16 is very reasonable, better than Republic Services' 19. Casella Waste Systems (Nasdaq: CWST  ) beats both of these companies with a share price of $6.84 and a P/E of 4.66, but there's a good reason those numbers are so low: The company is currently operating in the red.


Waste Management provides a service we can't live without, has strong top and bottom lines, and even pays a dividend of 4.1%. And it's a company that's trying to do the right thing. Are any companies perfect in this regard? No, but to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good.




Waste Management's success makes a strong case that there's no inherent contradiction between making money and making a difference. Read about two more Motley Fool favorites that are healthy, wealthy, and making a difference in their own ways in this special free report: The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail. Get your copy while it's still available by clicking here.




















In the debates and campaign ads leading up to the New Hampshire primary a new strain of Republican politics has suddenly surfaced -- a brand of compassionate capitalism that, were it to come from President Obama, Newt Gingrich would describe as socialism.



Gingrich has led this emergence with his blistering critique of Mitt Romney for being too good of a capitalist. There's even a movie produced by a pro-Gingrich super-PAC that powerfully tells how Romney ruined people's lives in his relentless quest for profits. Driven by the words of fired workers and a riveting anti-corporate script that could have been written by Michael Moore, Romney is blasted for shamelessly making big money by closing American businesses and eliminating thousands of jobs. I must admit, it's exciting to see what it looks like when the GOP puts capitalism on trial. In the past Romney would have been a Republican hero, a businessman who had what it takes to make tough economic decisions. But in this latest bizarre phase of GOP presidential politics, the guy is a monster.



Apparently the Republican field also hates special interest money in politics and the revolving door between government and corporate America. For weeks the candidates have hammered Gingrich for taking $1.6 million from Fannie Mae to be a "historian." He's laughably insisted that he never lobbied any of his former colleagues to earn that fee. Ron Paul and others have whaled on Rick Santorum for taking lobbying money from coal companies and insurers after he left the U.S. Senate. Imagine, a former elected official trading influence for cash!



But if Romney's critics were serious (and they're not), they'd be saying an "anything goes" approach to the free market isn't right. They would say he and all the other Wall Street sharpshooters made money at the expense of others and wronged thousands of innocent folks who believed in the American Dream.



The Republican hypocrisy is whiplash-inducing, even by the declining standards of American politics. Not that long ago Gingrich said that U.S. Senator Chris Dodd and U.S. Representative Barney Frank should go to jail for passing the landmark financial reform law that bears their names because it regulates the Romneys of Wall Street. Meanwhile the Republicans in Congress are practically employees of banks, Big Oil, insurance companies and other corporations that put profits before people.



As the candidates head into South Carolina, maybe they'll reveal what they propose to do about the outrageous free-market excesses they've discovered. Exactly how would they control the Romneys of the world--teach classes on compassion and restraint at Harvard and Wharton? How have they explained this to their corporate owners and political sponsors like the billionaire Koch Brothers? I suspect the Kochs have a lot of respect for Bain Capital, the corporate vehicle Romney used for his turbocharged pursuit of private equity profits. Bain Capital made money by snatching up companies on the cheap, stripping valuable assets and even shutting some of them down. Bain collected a ton of cash while eliminating jobs and devastating families and communities. What could possibly be wrong with that?



Since the Republican presidential candidates say they like regular people now -- even working and middle-class folks like the ones who give testimonials in the attack film against Romney -- they should tell the Republicans in Congress to extend unemployment insurance and the payroll tax reduction. And they ought to pay for it by imposing higher taxes on the super-rich, a policy overwhelmingly supported by the American people, including the millionaires who would have to pay more.



The Republicans running for president will obviously say and do anything to get elected, even if they sound like Democrats for a little while. Whatever they may say about Romney, all the Republicans are captives of big corporations that see our country as little more than a market to exploit for their private gain.



The 1 percent and the Republican politicians they own are tearing away the foundation of one of our country's greatest inventions, the middle class. Led by the Koch Brothers, right-wing extremists are working to undermine our democracy as well.



That's why the Democrats have to make the 2012 election about whose side the candidates are on. Are they for the 1% and the big corporations that want to destroy the middle class, or are they fighting for the rest of us? Are they for an America "where everyone gets a fair shot, when everyone does their fair share," as the President said in Osawatomie, Kansas? Or are they for an America where the rich get richer while everyone else is left to fend for themselves in an ugly race to the bottom.



These are very different visions of our country. That's why members of Congress and the President can't give any ground on key issues like Medicare, Medicaid and Social Security. If everyone is in favor of cuts to these and other important programs, then the boundary between the two sides will be blurred beyond recognition, and the choice will not be clear on Election Day.





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