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Cleanaway (ASX:CWY) Shares Trail Cash Flow Gains As Margins Crumple

Simply Wall St · 1d ago

Cleanaway Waste Management stock closed at A$2.63, with the last week slightly in the red but the 3 month line still ahead, which suggests the market is unsure whether to treat these results as a blip or a building trend. The key issue is margin pressure. Trailing net profit margin has roughly halved to 2.2% from 4.1% a year earlier, even as underlying earnings before interest and tax grew in the latest year and free cash flow lifted strongly. Traders reacted to the squeeze. Longer term investors may focus on whether those cash gains can rebuild profitability.

Is Cleanaway Waste Management a misunderstood low margin stock or a mispriced growth opportunity, given a 59.8x P/E and a DCF value far above A$2.63? See how the numbers line up in our valuation analysis for Cleanaway Waste Management

FY 2026 Earnings Summary

  • Revenue (FY 2026 vs FY 2025 PCP): A$4,404.1m vs. A$3,853.8m (higher level of revenue in FY 2026)
  • Net Income (Excl. Extra Items, FY 2026 vs FY 2025 PCP): A$98.5m vs. A$156.9m (decline in net income and compression in profitability)
  • Basic EPS (FY 2026 vs FY 2025 PCP): A$0.044011 vs. A$0.07033 (EPS fell as earnings weakened relative to revenue)
  • Net Profit Margin (FY 2026 vs FY 2025 PCP): 2.2% vs. 4.1% (margin roughly halved, indicating cost and mix pressure)

Prefer clear visuals instead of another wall of profit and margin figures? See Cleanaway Waste Management’s full financial picture with a simple snapshot of its valuation and profitability trade off in our company report for Cleanaway Waste Management.

ASX:CWY Trailing 12-Month Revenue & Expenses Breakdown as at Aug 2026
ASX:CWY Trailing 12-Month Revenue & Expenses Breakdown as at Aug 2026

Cleanaway bull case leans on cash and EBIT gains

Bulls argue Cleanaway is shifting from asset build to cash and margin delivery under Blueprint 2030. The FY26 print gives that view some support. Underlying EBIT of A$470.2m and underlying NPAT of A$223.1m both rose in line with net revenue of A$3.7b, while free cash flow of A$213.8m lifted much faster helped by working capital and fleet terms. Solid Waste, the core earnings engine, expanded EBIT to A$405m with margin at 16.2%, which fits the thesis of pricing power and better asset use. Contract Resources outperformed its acquisition case and is already delivering A$36.1m EBIT before A$6.4m of synergies, which points to early progress on M&A benefits. The higher fully franked dividend to A$0.0685 per share also matches the story of a more cash generative, income friendly profile.

Bear case flags profit quality, concentration and capex strain

The bear story is that Cleanaway relies too heavily on landfill, one off adjustments and capex heavy growth that may dilute real returns. FY26 gives bears some ammunition. Statutory NPAT declined to A$98.5m while underlying NPAT was A$223.1m, driven by legacy matters, re organisation, IT modernisation and impairments. That gap keeps the quality of earnings debate alive, even with management tightening adjustment policy from FY27. Group ROCE of 9.7% is improved but still modest for a capital intensive model with A$326.8m of cash capex and A$400m to A$410m signalled for FY27. The exit of the Construction & Demolition unit and closure of New Chum highlight portfolio clean up but also underline landfill and project risk. Weakness in Health and legacy Industrial Services, with EBIT and margins under pressure, shows not all segments are yet on a stable upward track.

See whether Cleanaway Waste Management’s cash gains and margin squeeze are prompting analysts to lift or cut their targets with the consensus price target analysis for Cleanaway Waste Management.

Keep Your Edge With Simply Wall St

If Cleanaway Waste Management’s mix of higher revenue, margin pressure and a rich 59.8x P/E has your attention, register free with Simply Wall St and add it to your Watchlist to track price against fair value and wait for a setup that fits your plan. Once you take a position, use the Portfolio Command Center to cut through market noise and stay on top of key developments that could affect your thesis. For longer term conviction, lean on the Community to see how other investors are thinking about the same risks and opportunities. That way you spot potential catalysts and warning signs early and give yourself a better chance of staying ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.