3. Republic Services (RSG) provides waste collection, transfer and disposal services.
Fundamentals: Republic's 12-month sales have risen 8.6%. Third-quarter net income increased 11% to $134 million and earnings per share climbed 9.4% to 35 cents. Adjusted profit stretched an impressive 16% year-over-year. Revenue declined marginally to $2.1 billion. The operating margin remained steady at 20%. Republic carried $121 million of cash and $6.9 billion of debt at quarter's end, converting to a quick ratio of 0.4 and a debt-to-equity ratio of 0.9.
Valuation: Republic's stock sells for a trailing earnings multiple of 28, a forward earnings multiple of 15, a book value multiple of 1.4, a sales multiple of 1.4 and a cash flow multiple of 8.2, 22%, 27%, 54%, 36% and 44% discounts to commercial services peer averages. Its PEG ratio of 0.9 represents a 10% discount to estimated long-run fair value. Morgan Stanley offers a bullish-scenario target of $50 and a bearish-scenario target of $22. Its base-case target is $38.