RSG — The #2 US waste operator, 18% ROE, $2.6B FCF, and a Moody's A3 upgrade — at fair-value P/E with peer-group-low EV/EBITDA

Stock: Republic Services, Inc. (NYSE: RSG) | Sector: Industrials / Environmental Services / Waste Management | Market cap: $63.05B 1

Price (Jun 18, 2026 close): $204.94 | 52-week range: $196.41–$251.17 | Next earnings: July 28, 2026 (after market close) 2

Why RSG passed the screen today

Criterion	RSG result	Pass?
ROE > 15% — FY2023	17.11% 3	✅
ROE > 15% — FY2024	18.62% 3	✅
ROE > 15% — FY2025	18.30% 3	✅
FCF positive — all three years	$1.99B / $2.08B / $2.41B, TTM $2.59B 4	✅
Valuation reasonable	Trailing P/E 29.40× near 5-yr avg ~30×; lowest EV/EBITDA among listed waste peers at 14.83× 1	⚠️ BORDERLINE

ROE methodology note: Figures use StockAnalysis's average-equity method; SEC XBRL period-end calculations produce 17.04% / 19.60% / 19.00% for FY2023–FY2025 — directionally consistent, both confirm Gate 1 passes. The discrepancy reflects different net income line items and equity averaging conventions. 3 5

Valuation flag explained: Gate 3 is borderline — not a clean pass, not a failure. At 29.40×, RSG's trailing P/E is barely below its own five-year average of ~30× and offers no meaningful discount to history. The real valuation argument sits at the EV/EBITDA level: 14.83× is the cheapest among the publicly listed pure-play waste peers (Waste Connections at 15.77×, GFL Environmental at 15.65×, Casella Waste Systems at 16.36×). 6 7 8 One clarification is necessary: industry leader Waste Management — featured as yesterday's pick on June 19 — traded at an EV/EBITDA of 14.21× when published, so RSG is not the cheapest in the entire sector. RSG is the cheapest among its comparable listed peers, which excludes WM. That distinction matters for how investors read the relative value case.

Trailing P/E

29.40×

EV/EBITDA

14.83×

ROE (FY2025)

18.30%

FCF (TTM)

$2.59B

P/B

5.27×

Next earnings

Jul 28

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A note on sector overlap with June 19's WM pick

Yesterday this channel covered Waste Management (NYSE: WM), the #1 US waste operator. RSG is the #2 — the same environmental services sector, but a meaningfully different financial profile. RSG carries a D/E ratio of 1.11× versus WM's 2.28×, a higher ROE (18.12% TTM vs. WM's ~29% but driven by WM's far higher financial leverage), an A3 credit rating from Moody's that WM's balance sheet does not hold, and a growing environmental solutions business that WM built through the Stericycle acquisition rather than organically. Reviewing both on consecutive days is defensible because they screen differently across the financial gates — but readers who already acted on the June 19 WM analysis should treat RSG as a distinct position, not a sector rotation.

What Republic Services actually does

Republic Services, headquartered in Phoenix, Arizona, is the second-largest non-hazardous solid waste management provider in the United States, with roughly 42,000 employees and FY2025 revenue of $16.59B. 9 The business runs through three operating segments: Group 1 (western US), Group 2 (southeast, midwest, and eastern US plus Canada), and Group 3 (environmental solutions spanning the US and Canada).

The core model is vertically integrated waste management: trucks collect from residential, commercial, and industrial customers; waste flows through roughly 240 transfer stations before reaching approximately 200 active RSG-owned landfills for final disposal; recycling streams go to advanced polymer centers; and captured landfill gas feeds 68 renewable energy projects — including a joint venture with BP for landfill-to-RNG conversion. 10 The internalization rate — the share of collected waste disposed in RSG's own landfills rather than paid to third parties — runs at 60–70%, and that is the central source of margin control. Municipal contracts covering residential collection typically run five to ten years with CPI-linked price escalators, providing both revenue visibility and a structural hedge against inflation.

RSG holds approximately 24.32% of the US non-hazardous solid waste market by revenue in Q1 2026, behind Waste Management at ~37.02%. 11

ROE: three years of consistent 17–19%

Unlike yesterday's WM pick, which carries ROE elevated partly by high financial leverage (D/E 2.28×), RSG's 17–19% range is generated at a more moderate leverage ratio (D/E 1.11×), making the returns somewhat cleaner on a leverage-adjusted basis.

Fiscal year (ends Dec 31)	Net income	ROE (avg-equity, StockAnalysis)	ROE (SEC period-end)
FY2023	$1,731M 9	17.11% 3	17.04% 5
FY2024	$2,044M 9	18.62% 3	19.60% 5
FY2025	$2,139M 9	18.30% 3	19.00% 5
TTM (Mar 31, 2026)	$2,170M 9	18.12% 3	—

The ROE trend is one of gradual improvement — FY2021 came in at 14.80% (marginally below the 15% threshold on StockAnalysis's methodology, though SEC period-end figures suggest it cleared the bar that year too). Every year from FY2022 forward has cleared 15% on both methods without exception. ROIC TTM of 8.46% and ROA TTM of 8.10% round out the profitability picture. 1

Among the publicly listed waste-only peers that cleared Gate 1 comparisons, RSG's ROE is decisive: Waste Connections at 13.12%, GFL Environmental at 2.99%, Casella Waste Systems at 0.46%. 6 7 8 RSG is the only company in that peer set passing Gate 1 on its own merits — which is partly why this pick comes one day after WM.

Free cash flow: $2.59B TTM, 5-year CAGR ~12%

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Period	Operating CF	CapEx	FCF	FCF margin
FY2021	$2,787M	-$1,316M	$1,470M	13.0%
FY2022	$3,190M	-$1,454M	$1,736M	12.9%
FY2023	$3,618M	-$1,631M	$1,987M	13.3%
FY2024	$3,936M	-$1,855M	$2,081M	13.0%
FY2025	$4,296M	-$1,887M	$2,409M	14.5%
TTM (Mar 31, 2026)	$4,498M	-$1,904M	$2,594M	15.5%

Source: 4

FCF has grown every year for five years without a single down year — a streak that held even through the FY2024 period when revenue growth slowed to 7.1%. The improving FCF margin (from 13.0% to 15.5% TTM) reflects CapEx as a share of operating cash flow declining from 47.2% in FY2021 to 42.3% TTM, as the collection-route and transfer infrastructure matures. FCF per share TTM stands at $8.34, putting the P/FCF at 24.31×. 1

FCF yield of 4.11% — against peers WCN (2.91%), GFL (0.55%), and CWST (1.85%) — is RSG's strongest relative valuation signal. 6 7 8 That cash flow is funding dividends of $750M TTM (annual rate $2.50/share, yield 1.22%, payout ratio 35.9%) and accelerating buybacks of $1.107B TTM — both covered at roughly 2.3× by free cash flow. 1

Valuation: P/E near fair value, EV/EBITDA cheapest among listed peers

vs. RSG's own five-year history

Year	Trailing P/E
FY2021	~34.5×
FY2022	~27.5×
FY2023	~30.2×
FY2024	~31.0×
FY2025	~30.9×
5-year avg	~30.8×
Current (Jun 18, 2026)	29.40×

Sources: 12 3

The current 29.40× sits just 5% below the five-year mean. That is not a meaningful discount — any investor framing this as a "historic bargain on P/E" is overstating the case. What it does establish is that RSG is not at a premium to its own history, and the floor implied by the FY2022 trough (~27.5×) offers a rough downside multiple reference.

vs. listed waste peers

Company	Trailing P/E	Forward P/E	EV/EBITDA	FCF yield	ROE (TTM)	Operating margin
RSG	29.40×	27.49×	14.83×	4.11%	18.12%	19.93%
Waste Connections (WCN)	37.54×	27.37×	15.77×	2.91%	13.12%	18.88%
GFL Environmental (GFL)	107.68×	—	15.65×	0.55%	2.99%	6.40%
Casella Waste Systems (CWST)	774.68×	—	16.36×	1.85%	0.46%	4.94%

Sources: 1 6 7 8

RSG's EV/EBITDA of 14.83× is the lowest in this peer group. The combination of the cheapest EV/EBITDA, the highest ROE (by a factor of 1.4× over the nearest peer, WCN), and the highest FCF yield (4.11% vs. 2.91% for WCN) is the core relative-value argument. On forward P/E, RSG (27.49×) and WCN (27.37×) are essentially tied — which means the market prices similar forward earnings, yet RSG generates significantly more cash per dollar of enterprise value. The PEG ratio of 3.29× (based on consensus 3-year EPS growth of 8.23%) is above 2.0, confirming this is a quality-at-fair-value setup, not a growth-at-a-discount one. 1

One additional caveat: this peer table excludes Waste Management (WM), covered June 19, which traded at EV/EBITDA of 14.21× at time of publication. WM's lower EV/EBITDA reflects its industry-leading scale and operational leverage; RSG's 14.83× is competitive but not the sector floor when WM is included.

Revenue and earnings: five-year CAGR of ~8%, margin expansion intact

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Period	Revenue	YoY	Net income	Diluted EPS	EBITDA margin	Net margin
FY2021	$11,304M	—	$1,292M	$4.04	29.6%	11.4%
FY2022	$13,509M	+19.6%	$1,488M	$4.69	28.4%	11.0%
FY2023	$14,974M	+10.8%	$1,731M	$5.47	29.3%	11.6%
FY2024	$16,033M	+7.1%	$2,044M	$6.49	31.1%	12.8%
FY2025	$16,586M	+3.5%	$2,139M	$6.85	31.5%	12.9%
TTM	$16,700M	+3.2%	$2,170M	$6.97	31.7%	13.0%

Source: 9

Revenue growth has decelerated as the base expands — FY2022's 19.6% included substantial M&A contributions from tuck-in acquisitions, while FY2025–TTM reflects a more organic 3–3.5% cadence. What has not decelerated is margin expansion: EBITDA margin crossed 30% in FY2024 and reached 31.7% TTM, and net margin has risen from 11.4% to 13.0% over the same span. Waste Dive noted that RSG "beat headwinds to deliver growth in Q1 [2026]" despite commodity price, fuel cost, and extreme weather pressure. 9 Revenue growth is driven by a combination of CPI-escalated contract pricing and steady tuck-in acquisitions — mechanisms that both tend to compound over time at a modest but reliable rate.

Balance sheet: $13.9B debt, investment-grade across all three agencies

Metric	TTM (Mar 31, 2026)
Total debt	$13,855M
Debt/Equity	1.11×
Net Debt/EBITDA	2.60×
Interest coverage	5.72×
Cash	$118M
Current ratio	0.67×
Altman Z-Score	3.12 (safe zone)
Tangible book value	-$5.59B (goodwill $16.93B)
Credit ratings	Moody's A3 / S&P BBB+ / Fitch A−

Sources: 13 1 14

The D/E of 1.11× is moderate for an asset-heavy waste operator — notably lower than WM's 2.28× (post-Stericycle). In April 2025, Moody's upgraded RSG's senior unsecured rating from Baa1 to A3 with a stable outlook, citing "resilient demand for solid waste services, effective pricing and cost controls, and accretive tuck-in acquisitions." 14 Per Moody's, a further upgrade would require "sustained EBITDA margin above 30%, funds from operations-to-debt nearing 35%, and debt-to-EBITDA sustained around 2.5×" — RSG's current EBITDA margin of 31.7% and Net Debt/EBITDA of 2.60× are already at or near those thresholds. 14

The negative tangible book value (-$5.59B) stems from $16.93B in goodwill carried from years of tuck-in acquisitions — standard for an acquisitive waste consolidator, and comparable to WM's own negative tangible book. Interest coverage of 5.72× provides adequate cushion, though the $118M cash balance means RSG relies on revolving credit and operating cash flow for near-term liquidity.

Competitive positioning and moat

Morningstar assigns RSG a "wide moat" rating, observing that it "enjoys dominance in landfill ownership" and benefits from "a vast network of collection routes and transfer stations, which bestow significant control over the waste stream." 15 KoalaGains identifies landfill ownership as RSG's "most powerful competitive advantage, giving it control over disposal costs and significant pricing power over competitors." 10

The structural moat rests on four elements:

Landfill ownership (~200 active sites): Permits take years to obtain — sometimes decades — and new landfill siting faces intense regulatory and community opposition. RSG's existing permitted airspace is a finite, non-replicable asset.
Route density and transfer network: RSG operates as #1 or #2 in most served markets. Dense routing reduces per-ton collection cost; the ~240 transfer stations anchor waste flow into owned disposal.
Long-term municipal contracts: Five to ten-year terms with CPI escalators provide inflation protection and highly predictable revenue — roughly the same durability as a utility franchise.
Vertical integration (60–70% internalization rate): Internalizing disposal avoids third-party tipping fees and is a direct margin lever unavailable to regional competitors without landfill ownership.

One area of structural limitation: the recycling business, while growing, carries lower EBITDA margins than the core waste franchise and exposes RSG to commodity pricing volatility in fiber and plastic resins. 10 Approximately $150M in annual commodity sales are at risk from commodity price swings — manageable in context but worth tracking. RSG has been migrating toward fee-for-service recycling contracts with price floors to reduce that exposure.

Risk factors

Risk 1 — Regulatory and environmental liability ($178M since 2000). Good Jobs First' Violation Tracker records $177.68M in total penalties since 2000 across 289 incidents, with $161.7M tied to environmental violations. 16 The two largest — an $87M Missouri AG settlement in 2018 and a $37M EPA water pollution penalty in Nevada in 2008 — are historical. More recent: a $671K EPA fine for a Niagara Falls landfill and a 2026 court ruling finding 419 Clean Water Act violations at Modern Landfill. Watchpoint: PFAS regulations advancing under RCRA and the Clean Water Act in 2026 represent the next wave of potential environmental liability — RSG's Middle Point Landfill (TN) is already facing a local government lawsuit. 16

Risk 2 — Argus downgrade and mixed analyst signals. On May 11, 2026, Argus Research downgraded RSG to Hold from Buy, suggesting limited near-term upside at current valuation levels. 2 Bernstein also holds a Market Perform rating with a $220 price target — implying RSG may trade sideways. Citi has maintained Buy with a $247 target (lowered from $253), the same day as the Argus downgrade. The split creates a real range: the Bernstein $220 target is 7.3% below the June 18 close, while the consensus $243.58 target implies +18.9% upside. Readers should weigh the $220 floor as the current pessimistic case, not an outlier.

Risk 3 — Revenue deceleration. Revenue growth has stepped down from 19.6% (FY2022) to 10.8% (FY2023) to 3.5% (FY2025). The deceleration reflects organic price growth moderating as CPI has cooled, plus a smaller acquisition pipeline than the industry consolidation phase of 2018–2022. Consensus forecasts 3-year revenue CAGR of 4.57% — modest but stable. 1 Any sustained miss below that pace would pressure margin expansion assumptions and EPS growth forecasts.

Risk 4 — Insider selling, low insider ownership. Insider ownership sits at 0.14% of shares outstanding — negligible equity alignment for management. A director (Sandra Volpe) sold $380K in shares on June 11, 2026, and the Chief Accounting Officer sold $78K in May. 2 These are not large figures in dollar terms, but they occur at a share price near the 52-week low — a period when insiders with conviction typically buy. The notable exception: Cascade Investment (Bill Gates' investment vehicle and RSG's 10% owner) purchased approximately $187M of RSG shares between May 11–18, 2026, at prices ranging from $197.18 to $213.31 — a meaningful contrarian signal from the largest affiliated holder. 2

Near-term catalysts

Q2 2026 earnings — July 28, 2026, after market close. Q1 2026 revenue of $4.07B (+2.6% year-over-year) and organic growth of 2.8% in the recycling and waste segment came in ahead of estimates on EPS while missing slightly on revenue. 2 For Q2, three variables warrant attention: (1) whether organic price growth in the recycling and waste segment holds above 2% as CPI escalator contracts cycle through; (2) environmental solutions segment trajectory (Q1 showed -1.3% organic growth, signaling softness in the industrial waste business); (3) any update to the 2026 capital allocation guidance, specifically regarding tuck-in acquisition pace.

Ex-dividend date — July 2, 2026. Annual dividend $2.50/share (1.22% yield), payout ratio 35.9% of earnings. 1 The dividend has grown steadily with earnings; at the current FCF trajectory, the payout is covered approximately 3.5× by free cash flow, leaving ample room for continued growth.

Analyst consensus: 27 analysts, Buy consensus, average price target $243.58 — implying +18.85% upside from the June 18 close of $204.94. 1 The stock trades at 4.3% above its 52-week low ($196.41), 18.4% below its 52-week high ($251.17). Goldman Sachs initiated at Buy with a $255 target in November 2025; Stifel resumed at Buy with a $257 target in September 2025.

Cascade Investment's $187M purchase in mid-May 2026 — at prices between $197 and $213 — represents a strategic bet by a long-term 10% holder who doubled down near current levels. That is the highest-profile insider-affiliated signal in the dataset. 2

Decision framework

This is not a buy or sell recommendation. What RSG presents is a cash-compounding waste infrastructure franchise — the #2 US waste operator with a wide Morningstar moat rating, 18%+ ROE for three consecutive years, and a 5-year FCF CAGR of ~12% — at a valuation that is roughly fair on P/E relative to its own history, and moderately cheap on EV/EBITDA relative to its publicly listed peers.

The bull case requires three conditions to hold: (1) the 4.11% FCF yield continues to grow as operating cash flow expands and CapEx matures; (2) the EBITDA margin stays above 31%, sustaining the Moody's A3 upgrade conditions and potentially paving the way toward the next notch; (3) the July 28 Q2 earnings call shows organic price growth holding in the recycling and waste segment while environmental solutions stabilizes. On consensus 3-year EPS growth of 8.23% and a P/E reversion toward the five-year mean of ~30.8×, the stock's implied return to the consensus price target of $243.58 is broadly consistent with holding at approximately current multiples plus earnings compounding.

The bear case does not require much: at an already-modest P/E discount to history (~5%) and a 1.22% dividend yield, total return depends heavily on earnings growth materializing. If revenue growth slows below 3% and margins plateau, the multiple compression implied by the Bernstein $220 target (-7.3% from current) is achievable. The Argus downgrade in May makes this the explicit Wall Street minority view, not a tail risk.

The most direct signal to watch at Q2 earnings: organic price growth in the recycling and waste segment. RSG's inflation-linked contract structure means pricing is the primary earnings growth driver. Below-CPI pricing in Q2 would be the clearest warning that the core revenue engine is underperforming expectations.

Short interest at 1.18% of float is essentially nil — no meaningful squeeze dynamic or forced-seller overhang. 1 The 52-week low of $196.41 — about 4.1% below the June 18 close — gives investors a near-term level to monitor as a downside reference.

This article is for informational purposes only and does not constitute investment advice. All data cited above; financial figures as of the dates noted.