What are your thoughts on the long term prospects of this company?
Also, what are your thoughts on the CEO and his capital allocation ability?
Thank you,
GFL operates a playbook of growing through acquisitions with a leveraged balance sheet, by consolidating small players in one industry (waste management). This playbook is usually referred to as a “roll-up”. GFL’s CEO has demonstrated a decent history of execution in the last few years, with 5-year revenue growth of around 18%. He also writes a good shareholder letter. As the founder, he has certainly delivered growth, with sales up 10X since 2015. This article from last year is a good read on him. GFL continues to reinvest heavily into growth. Due to the stability of the indusry, and recurring nature of the business, the debt level is quite high, with net debt/EBITDA consistently more than 5.0x. Valuation is reasonable compared to the historical average, 14.1x EV/EBITDA (historically range from 13.8x to 19x). Overall, a decent name, but investors need to be comfortable with the debt level and entrust the CEO with his capital allocation skills. Here are some more generalized comments on the recent quarter: GFL's results reflect a focus on improving the profitability of its core waste operations after selling non-core markets and slowing acquisitions. Solid-waste revenue grew 4.2% organically as price increases offset declines in volume, fuel surcharges and commodity prices, while Ebitda margin expanded 250 bps despite dilution from commodity price declines and recent acquisitions. Environmental Services organic revenue growth slowed to the single digits due to declines in soil remediation work. Free cash flow met expectations.