Since May 2020, the S&P 500 has delivered a total return of 100%. But one standout stock has doubled the market - over the past five years, Republic Services has surged 199% to $245.57 per share. Its momentum hasn’t stopped as it’s also gained 17.5% in the last six months, beating the S&P by 17.1%.
Is it too late to buy RSG? Find out in our full research report, it’s free.
Why Does Republic Services Spark Debate?
Processing several million tons of recyclables annually, Republic (NYSE: RSG) provides waste management services for residences, companies, and municipalities.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Republic Services’s sales grew at a solid 9.3% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers. 
2. Operating Margin Reveals a Well-Run Organization
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Republic Services has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
One Reason to be Careful:
Sales Volumes Stall, Demand Waning
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Waste Management company because there’s a ceiling to what customers will pay.
Over the last two years, Republic Services failed to grow its units sold. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Republic Services might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
Final Judgment
Republic Services’s positive characteristics outweigh the negatives, and with its shares topping the market in recent months, the stock trades at 34.9× forward P/E (or $245.57 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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