Michael DecterGFL Environmental Inc.GFL.TOPARTIAL BUYOct 03, 2023

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.
Unlock Premium - Try 5i Free

It is comparable to Waste Management but the valuations are rally high in that sector. There is not a huge amount of organic growth. It has made debt-fueled acquisitions. The valuation is too rich for him and the debt is too high. You have to get it at a much lower price.

He continues to own Waste Connections (WCN-T) and when this one IPO'ed there was no reason to switch. GFL-T had more debt and were growing quickly by acquisitions and levering up the balance sheet. He is unsure if they can grow at the same rate now that they are public. He would stick with others.