GFL CN

Publicly traded companies mentioned herein: Casella Waste Systems Inc (CWST), Clean Harbors Inc (CLH), GFL Environmental Inc (GFL CN), Republic Services Inc (RSG), Waste Connections Inc (WCN), Waste Management Inc (WM)

Highlights

The presenter is long shares of GFL Environmental Inc (GFL CN), which IPO’d in March 2020 and is the fourth largest diversified environmental services company in North America. It is primarily comprised of solid waste assets (>80% of the business mix), and he finds this exposure attractive since GFL is either the exclusive operator or competing within an oligopoly in its operating markets. The remaining <20% of the business is its hazardous waste segment (Environmental Services), which he describes as asset light and different from Clean Harbors (CLH) given GFL’s focus on emergency services and soil remediation. Since GFL has acquired its assets more recently than many of its peers, he sees more runway to drive revenues and margins through initiatives that others have already implemented, leading to the expectation that GFL will have best-in-group topline growth and margin expansion. He is also bullish on the impact from its newer Renewable Natural Gas (RNG) business, as well as recent divestitures that have allowed GFL to reduce its balance sheet leverage. At its current C$48.50 share price, GFL trades at 11x consensus 2025 EBITDA multiple, whereas industry leaders like Waste Connections (WCN) and Casella Waste Systems (CWST) trade at 14x – 15x 2025 EBITDA. He feels that GFL deserves a similar valuation, which implies 44% upside to C$70 per share.