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About GFL Environmental
Headquartered in Vaughan, Ontario, which is tucked away in the country that just so happens to be our neighbor to the north, Canada, GFL Environmental is a waste management company that has a sustainability twist, seemingly focused on taking care of not only one’s garbage in Canada, but within the United States as well, in an exceedingly earth-friendly fashion, this being one of the distinguishing factors between itself and the plenty of other companies it goes up against.
I mean, GFL stands for “Green for Life” for a reason.
Some of the ways in which this company flexes its green thumb is through, in addition to just helping keep communities clean by virtue of taking their trash away, maintaining multiple processing facilities that are intent on diverting all sorts of waste from entering landfills, not to mention its extensive investment(s) in renewable natural gas projects aimed towards reducing factory emissions.
I respect it, GFL.
While taking out and taking care of the garbage sounds like a very boring business, boring tends to go hand and hand with steady, and boy do I imagine that GFL’s revenues reflect this, or so I hope they do. At any rate, GFL operates in a proven recession resistant industry, as there is hardly any sort of offseason when it comes to taking care of someone’s garbage, and a more compelling way to think about it is simply understanding that a lot has to go horribly, horribly wrong before this slow and steady line of service goes out of business.
Plus, people get really cranky and emotional when their garbage isn’t taken care of, and it is hard to envision a North American society in which trash isn’t consistently picked up, whether it is in your very neighborhood, your place of work or place(s) of recreation. In fact, this is precisely how a company like GFL Environmental generates its revenues; through the contracts it develops with local government agencies, municipalities, and other organizations such as businesses, among other household governmental institutions.
Given the company’s focus on being a green operator in the trash industry, I’ll briefly mention that this is definitely on trend with society’s general viewpoints as they relate to the climate, and while that could be viewed as significant in its own right, what I think is much more important is the fact, this being the case, many government agencies are becoming increasingly incentivized to get greener by those they serve and what other company would be better than one with an already intense concentration on being friendlier towards the environment like GFL.
Regarding the firm’s presence in the United States, GFL has established itself throughout the Midwest and the South, servicing regions such as Michigan, Colorado, New Mexico, Louisiana and who could ever forget about Texas.
While still on the subject of Texas, GFL Environmental has been in the mode of ironing out some strategic, regional acquisitions in and around the State, an example being the company’s purchase of Sprint Waste Services, largely serving the sprawling areas of Houston and the accompanied Gulf Coast, and without delving into the company’s finances quite yet (patience, grasshopper), I like seeing that this company is growing through acquisitions, planting more operational roots within the United States.
So there it is.
GFL Environmental in a nutshell.
Now is about the right time to invest in learning more about this company from a more objective and strict financial perspective, in hopes of determining whether or not this waste management company is worth its weight in trash.
You already know that one man’s trash might just end up being another man’s treasure.
Trash or treasure, here is an overview of GFL through the lens of its finances.
GFL’s stock financials
Putting my nerdy euphemisms to the side (for now), it can initially be found that GFL Environmental is a $14.4 billion company, according to its prevailing market capitalization, and it also has a share price of $39.53 along with a price-to-earnings (P/E) ratio of zilch, all while distributing an annual dividend in the amount of a very specific $0.056 per annum.
Yes, that’s about a nickel each year, ladies and gentlemen.
In putting some of this preliminary information together, it appears as though GFL might not be net profitable at the moment (given that it does not currently have a displayed price-to-earnings ratio), which is something I would not have initially suspected, however, when digging more into the company’s more recent financial and broader overall investment activities, some more light has been shed on this matter, as GFL really does seem to be doing a lot of intentional and sizable investing, particularly in the previously mentioned natural gas segment of its business, along with other forms of renewable energy sources.
This sort of newer technology begs a good deal of investment and with the capital GFL Environmental is putting behind these fairly new projects and initiatives, some profit will invariably be sacrificed in the process, evidently.
Also, as it pertains to the company’s dividend, it is tiny.
That’s all I really have to say, other than being that it is so small, it definitely does not push the needle for me one way or the other.
When it comes to the most recently reported condition of GFL’s balance sheet, the company’s executive team is in charge of tending to and taking care of just about $15 billion in terms of total assets as well as just a hair under $9.6 billion in terms of total liabilities, and being that this is a very industrial, equipment-heavy company tied with the fact that it is putting a lot of resources to work and investing in different previously mentioned projects, I deem this to be a good balance sheet, nothing more, nothing less. Specifically, the company has a sufficient buffer between its cumulative amount of assets with respect to its liabilities, giving me some short-term comfort that this company isn’t going out of business anytime soon, and I also deem it to be a plus in that it has room to put even more capital to work, telling me that growth is still a solid possibility for this enterprise.
Onto the company’s income statement, GFL’s total annual revenues spanning between and during 2019 and 2023 have shown some real, tangible growth, in fact, growing each and every year during this timeframe, which for an already established sanitation company, isn’t the easiest of feats. For instance, the company’s revenues starting off in 2019 showed a relative low of $2.5 billion, rising the following year to $3.3 billion, $4.3 billion in 2021, almost $5 billion in 2022, leading up to its latest report of $5.6 billion, as reported in 2023.
I don’t have to tell you just how solid the annualized growth has been from GFL Environmental in recent years, as the numbers clearly speak for themselves. While this is more than likely a byproduct of the company continuing to further expand its geographical footprint across Canada and the United States, it is still impressive and given this sort of momentum, even during pronounced periods of greater overall economic volatility, it is hard to imagine GFL not growing its annualized revenues even further at a similar pace.
Regarding the company’s cash flow statement, GFL’s total cash from operations during this same frame of time have grown as well, basing out a relative low of $193 million (2019), topping out at a high of $809 million, as reported in 2022.
Once again, stellar numbers, but on a very important front, and while revenues are surely of great importance in my mind, the amount of cash that a company is able to churn out of its operations is plenty important, as it directly impacts what it can do moving forward, directly impacting its performance.
To generally turn over more cash through its business operations on top of each subsequent year, despite growing through acquisitions and other sizable investment activities, is very impressive.
GFL’s stock fundamentals
As it stands with the company’s net profit margin, Charles Schwab’s platform lists GFL’s net profit margin as -9.07%, which isn’t exactly encouraging, but this is primarily why I’ve decided to continuously, and annoyingly harp on just how much this company is investing, and while this happens to be the current case with GFL’s net profit margin, I don’t presume it will be a long-term scenario, as once the results of their capital deployment(s) really begin to unfold, the company’s net profit margin is poised to grow, along with the company continuing to grow sustainably (you already know that pun was intended) through acquisitions and other organic growth avenues.
On the basis of comparison, much larger competitors such as Waste Management and Republic Services maintain far more attractive net profit margins, both sitting at around 12% as of this publication, which makes sense given their size and scale and other supplemental factors, however, as GFL Environmental continues growing and maturing, the current state of its net profit margin could presumably offer some sort of longer-term opportunity for patient investors.
Should you buy GFL stock?
Intriguing, indeed.
The facts of this potential investment case tell me that GFL seems like a company that is flying a bit under the radar of many of the funds out there and even, dare I say, much of the greater overall investment community?
I mean, heck, GFL Environmental has the luxury of operating within a largely recession safeguarded industry, its balance sheet is just where I wanted (and expected) it to be, its revenues have been growing at a notable rate in its most recently reported years, growing each and every year, not to mention that its total cash from operations have grown tremendously as well, and this company has been on a continued acquisition tear and given the success it has seen thus far, it is difficult for me to imagine this company slowing down anytime soon.
While its net profit margin is hardly the prettiest at the time of this publication, I largely believe that this is a primary cost of making a lot of long-term investments, especially being that this is a very intentionally green company, and being that green isn’t exactly as mainstream as it likely will be in the future.
I think the odds are that someone who pondered an investment in the company sooner rather than later would have a higher likelihood of getting in on this relative ground floor rather than just merely inching into a stake into a (net) unprofitable sanitation company.
Tomato, tomato.
In other words, it is my educated guess that the profit picture is going to develop quite nicely over the years to come, although it might take a little time.
Thus, the “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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