Casella Waste Systems (CWST)

Waste management company Casella (NASDAQ:CWST) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 17.9% year on year to $485.4 million. On the other hand, the company’s full-year revenue guidance of $1.83 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $0.42 per share was 29.5% above analysts’ consensus estimates.

Company Overview

Starting with the founder picking up garbage with a pickup truck he purchased using savings from high school, Casella (NASDAQ:CWST) offers waste management services for businesses, residents, and the government.

Waste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.

Competitors offering similar products include Waste Management (NYSE:WM), Republic Services (NYSE:RSG), and Waste Connections (NYSE:WCN).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Casella Waste Systems’s sales grew at an incredible 18.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Casella Waste Systems’s annualized revenue growth of 23.5% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Casella Waste Systems reported year-on-year revenue growth of 17.9%, and its $485.4 million of revenue exceeded Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to grow 8% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and indicates the market is forecasting some success for its newer products and services.

Casella Waste Systems’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 34% gross margin over the last five years. Said differently, Casella Waste Systems paid its suppliers $66.03 for every $100 in revenue.

This quarter, Casella Waste Systems’s gross profit margin was 35%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Casella Waste Systems was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.2% was weak for an industrials business. This result is surprising given its high gross margin as a starting point.

Looking at the trend in its profitability, Casella Waste Systems’s operating margin decreased by 5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Casella Waste Systems’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Casella Waste Systems generated an operating margin profit margin of 6.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Casella Waste Systems’s EPS grew at a decent 8.9% compounded annual growth rate over the last five years. However, this performance was lower than its 18.5% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Casella Waste Systems’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Casella Waste Systems’s operating margin was flat this quarter but declined by 5 percentage points over the last five years. Its share count also grew by 30.8%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Casella Waste Systems, its two-year annual EPS growth of 18.1% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, Casella Waste Systems reported adjusted EPS of $0.42, up from $0.27 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Casella Waste Systems’s full-year EPS of $1.38 to shrink by 13.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Casella Waste Systems has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.6% over the last five years, quite impressive for an industrials business. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Casella Waste Systems’s margin expanded by 5.6 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Casella Waste Systems’s free cash flow clocked in at $159.5 million in Q3, equivalent to a 32.9% margin. This result was good as its margin was 18.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Casella Waste Systems historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.8%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Casella Waste Systems’s ROIC averaged 3.6 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Casella Waste Systems reported $192.7 million of cash and $1.23 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $392.4 million of EBITDA over the last 12 months, we view Casella Waste Systems’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $22.53 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Casella Waste Systems beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance slightly missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 2.3% to $84.96 immediately after reporting.

Updated: December 4, 2025 at 9:07 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Casella Waste Systems isn’t a bad business, but we’re not clamoring to buy it here and now. First off, its revenue growth was exceptional over the last five years. And while Casella Waste Systems’s projected EPS for the next year is lacking, its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion.

Casella Waste Systems’s P/E ratio based on the next 12 months is 78.4x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $112.78 on the company (compared to the current share price of $94.73).