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3 Reasons to Avoid WSC and 1 Stock to Buy Instead

WSC Cover Image

Over the last six months, WillScot Mobile Mini’s shares have sunk to $21.67, producing a disappointing 10.6% loss - a stark contrast to the S&P 500’s 23.2% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in WillScot Mobile Mini, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.

Why Is WillScot Mobile Mini Not Exciting?

Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons you should be careful with WSC and a stock we'd rather own.

1. Revenue Growth Flatlining

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. WillScot Mobile Mini’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years. WillScot Mobile Mini Year-On-Year Revenue Growth

2. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for WillScot Mobile Mini, its EPS declined by 10.1% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.

WillScot Mobile Mini Trailing 12-Month EPS (Non-GAAP)

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, WillScot Mobile Mini’s margin dropped by 6.9 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. WillScot Mobile Mini’s free cash flow margin for the trailing 12 months was 17.3%.

WillScot Mobile Mini Trailing 12-Month Free Cash Flow Margin

Final Judgment

WillScot Mobile Mini’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 17.3× forward P/E (or $21.67 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d recommend looking at one of our top software and edge computing picks.

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