GFL, a Vaughan-based waste management company, saw its revenue go up 27.4 per cent year-over-year in the first quarter of 2022.

Garbage pickers: Green For Life Environmental vs. Waste Connections

By Rosa SabaBusiness Reporter

Sat., May 21, 20223 min. read

Green For Life Environmental (GFL)

It’s a good year to be in the garbage business.

Vaughan-based GFL, North America’s fourth-largest environmental services company, saw its revenue go up 27.4 per cent year-over-year in the first quarter of 2022.

According to Scotiabank, the relaxation of COVID-19 restrictions in Canada will likely have an outsized impact on the environmental services sector, which took a hit during COVID-19 with offices and other buildings shut down for months on end.

The firm’s stock price has gone down in the past year, from more than $32 (Canadian) to more than $28, after a high of more than $41 in October 2021.

A Scotiabank analyst report from May 5 noted that the company has exceeded expectations almost every quarter since it went public in March 2020. The bank is targeting a $46 share price.

“We continue to view GFL’s valuation as a relative outlier, with the company, in our opinion, likely to compound industry leading growth,” the Scotiabank report states, adding that GFL has an opportunity “to capture incremental pricing surcharges.”

GFL’s rise over the past decade has been impressive. In 2011, when it secured a waste collection contract in one Toronto district, it was a fraction of the waste management giant it is today. In the first quarter of 2022 alone, GFL completed nine acquisitions.

BMO analyst Devin Dodge saw “encouraging signs” in GFL’s latest earnings, according to a May report.

“These trends should be supportive for attractive earnings growth through the balance of the year and into 2023,” he wrote, rating the stock to outperform.

Waste Connections

This U.S.-based company, which provides nonhazardous solid waste collection, transfer, disposal, and recycling, saw its revenue go up 17.9 per cent in the first quarter of 2022, which a May Scotiabank analyst report said was in line with expectations.

The company’s stock price is more or less where it was a year ago, up around a dollar to more than $122 (U.S.) after a peak of almost $145 in April 2022.

The Scotiabank report said the company is managing inflationary pressures through pricing with success, and targeted a $135 share price. Other firms have been targeting higher, from $142 to $170.

DBRS Morningstar analyst Brian Bernard said in a recent report that the company’s secondary and rural market strategy means it faces less competition than its urban-focused competitors, contributing to its profitability.

“Waste Connections was enjoying the fruits of a successful merger integration and tailwinds from healthy U.S. macroeconomic expansion heading into 2020, but the COVID-19 pandemic threatened to interrupt the firm’s strong performance track record,” wrote Bernard. “However, Waste Connections persevered, shining a light on the resiliency of the firm’s business model.”

Dodge predicted continued M&A activity on the horizon for Waste Connections in a May report, giving the company an Outperform rating.

Rotman School of Management marketing professor David Soberman noted Waste Connections, which is headquartered in the U.S., is a lot bigger than GFL. However, the latter has a stronger history of sustainability, he said.

“Because of the interest society has in the environment and sustainability, firms involved in waste management that innovate and find creative ways to recycle and reduce the negative impact of garbage on the environment will get a lot of press and interest,” he said.

The bottom line

Both waste management companies — and the industry as a whole — are poised to do well in the coming year, with the power to adapt their pricing in reaction to inflationary pressures. The North American waste management industry is expected to generate $229.3 billion by 2027, up from $208 billion in 2019, according to a 2021 Allied Market Research report.

However, analysts see GFL as a potential outperformer in the market, while they predict a steady future for Waste Connections. More risk, more reward — and GFL is worth the risk.

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