Written by Amy Legate-Wolfe at The Motley Fool Canada
Waste management companies have consistently stood out as resilient investments during market downturns. Today, we delve into why GFL Environmental (TSX:GFL) stock. Despite its relatively recent debut on the TSX today, it is a strong contender for investors seeking long-term growth opportunities. Today. we will explore GFL stock’s history, earnings growth, future outlook, and analyst recommendations. It becomes evident that this waste management company has the potential to yield substantial returns in the decades to come.
A doubling stock already
GFL stock, founded by Patrick Dovigi, entered the public market with a bang. Since then, it’s doubled its share value since its debut on the TSX today. While it may be a newcomer, GFL stock’s services extend far beyond waste management. It encompasses environmental solutions that tackle today’s pressing sustainability challenges. Waste management companies have historically thrived, demonstrating stability and growth, even in challenging economic climates.
GFL stock’s recent earnings report provides compelling evidence of its strength as an investment. The company achieved a net leverage ratio of 4.18 — its lowest level in history, after divesting assets for over $1.6 billion. Notably, revenue increased by an impressive 13.8%, driven by a 10.4% surge in solid waste prices year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) reached $540.7 million, marking a remarkable 19.3% increase. Net income from continuing operations stood at $293.8 million. Adjusted earnings per share (EPS) from continuing operations were $0.53, demonstrating solid financial performance.
Furthermore, GFL stock’s ability to expand its adjusted EBITDA margin by 130 basis points reflects its pricing and efficiency initiatives, outperforming industry expectations. Year-to-date acquisitions have generated approximately $48 million in annualized revenue, showcasing the company’s commitment to growth.
Future outlook and analyst recommendations
GFL stock’s updated guidance for 2023 is promising. The company anticipates revenue of approximately $7.4 billion, with an estimated adjusted EBITDA of $2 billion and adjusted free cash flow (FCF) of $705 million. Notably, GFL stock aims to maintain a net leverage ratio of less than four, emphasizing a commitment to financial stability.
Analysts have taken notice of GFL stock’s potential, with a target price of $58, surpassing the $48.68 average. This upward revision comes with a “buy” rating, highlighting the company’s strong performance and growth prospects. Analysts believe that GFL’s strategic focus on cost-saving initiatives, acquisitions, and deleveraging will narrow the valuation gap with other waste management companies.
As the world grapples with environmental challenges and the need for sustainable solutions intensifies, GFL stock emerges as a promising investment opportunity. Its impressive earnings growth, forward-looking guidance, and favourable analyst recommendations all point toward a company with the potential for long-term success.
Waste management companies have a track record of resilience. This makes GFL stock an attractive choice for investors seeking stability and growth, even in uncertain times. With its commitment to sustainability and a strong financial foundation, GFL stock has the potential to deliver substantial returns to investors in the years to come. As the company continues to expand its footprint, it’s safe to say that GFL stock is only just beginning its journey towards becoming a dominant player in the waste management industry.
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