-
Casella Waste Systems Inc. (CWST)
-
Waste Connections Inc. (WCN)
-
GFL Environmental Inc. subordinate voting shares (GFL)
that the market was disappointed. Is it still worth holding or has the outlook changed?
Thank you for your information.
WCN is now trading at 28.4x times' Forward P/E. In the 3Q, WCN’s revenue grew by 9.8% to $2.07B, in line with analyst estimates, and it reported EPS of $1.17 slightly beating estimates of $1.13. Its balance sheet is fairly leveraged, with net debt of $7B and net debt/EBITDA of 2.9x, however, given the predictability and recurring nature of the business, it is not too concerning (and still much lower relative to peers such as GFL, CWST). Its Adjusted EBITDA margins of 32.5% grew by 1.2% over the prior year, although, there have been recent site-specific developments at some of its landfills, which may negatively impact its Q4 revenue, Adjusted EBITDA, and adjusted free cash flow by up to $20M.
Based on consensus estimates, sales are expected to grow by low double digits going forward. The company also recently raised its dividend by 11.8% to $1.14 annually. Overall, the results were okay, although its growth decelerated compared to previous quarters. Given the current tough market environment, it seems companies need to report 'perfect' quarters in order to see positive price action following the report. Overall, its valuation is somewhat lofty at 28.4X forward earnings, but we would be comfortable holding this name.