For better or worse because of the university's reputation they now attract the best students coming in and, guess what, they graduate the best students at the end. Like many great universities they benefit from selection bias. If you're a Canadian kid who wants to get the best CS or engineering education then U Waterloo is on your shortlist. (That said, it's not the only really good school for CS or engineering in the country as some U of T grad will probably be quick to point out.)