By investing in undervalued stocks with strong underlying fundamentals, you can consistently earn returns that beat inflation over time. However, it is essential to identify quality companies that are part of growing, addressable markets, allowing them to consistently grow their sales and profits.
An example of such a TSX stock is Waste connections (TSX:WCN). Waste Connections, with a market capitalization of $43 billion, provides non-hazardous waste collection, transfer, disposal and recycling services in the United States and Canada. It serves residential, commercial, municipal and industrial customers, operates landfills and transfer stations and provides specialized waste management for oil and gas exploration.
TSX stock has returned more than 500% to shareholders in dividend-adjusted earnings over the past decade. Despite these outsized returns, WCN shares are down nearly 17% from their all-time highs, giving you a chance to buy the dip.
Is this TSX stock a good buy right now?
Waste Connections delivered third-quarter results that exceeded expectations, demonstrating the sustainability of its solid waste business model amid continued economic headwinds.
The company reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margins of 33.8%, reflecting underlying solid waste margin expansion of approximately 80 basis points, despite increasing pressure on raw materials.
Revenue grew 5.1% year-over-year to $2.46 billion, driven by strong price execution of 6.3% in core solid waste services. Management raised its full-year price guidance to around 6.5%, up from initial expectations of 6%, citing improved retention thanks to new data analytics tools.
Volumes declined 2.7% during the quarter, similar to trends in the second quarter, mainly due to deliberate divestments of low-margin contracts and continued weakness in construction-related activity.
Waste Connections has deployed new artificial intelligence and data analytics platforms that are already showing compelling results. The price optimization tool, which has been rolled out to approximately one-seventh of company locations, has reduced customer churn by 30% to 40% while maintaining similar price increases.
Management expects to expand this technology to half or three-quarters of its business by 2026, positioning the company for further margin gains.
Acquisition activity remained robust, with annualized revenues of approximately $300 million, whether closed or under a definitive agreement year-to-date. Notable wins included two of Florida’s largest private waste companies, demonstrating the company’s ability to implement strategic consolidation in attractive markets.
Looking ahead to 2026, management provided preliminary guidance for mid-single-digit revenue growth, driven by price-led organic growth and approximately 1% from acquired acquisitions.
What is the price target of the WCN share?
Analysts who follow the TSX stock predict that revenue will increase from $8.92 billion in 2024 to $12.63 billion in 2029. During this period, adjusted earnings are expected to rise from $4.79 per share to $8.24 per share. Moreover, free cash flow is expected to improve from $1.22 billion in 2024 to $2.26 billion in 2029.
Waste Connections has increased its annual dividend per share from US$0.41 in 2016 to US$1.17 in 2024. This payout is expected to rise to US$1.29 this year and to US$2.43 in 2029.
Recently, the company’s board authorized an 11.1% dividend increase, marking the 15th consecutive year of double-digit growth since the dividend was introduced in 2010. With an annual dividend charge of roughly US$330 million, WCN’s payout ratio is less than 30%, which is quite sustainable.
As of October 2025, WCN shares are trading at a forward FCF of 30 times, which is lower than the five-year average of 32.4 times. If the stock is priced at 27 times FCF forward, it could deliver a return of almost 40% within the next three years. Given consensus estimates, the TSX dividend stock is trading at a 22% discount in October 2025.
#table #dirtcheap #Canadian #growth #stock