Q: GFL or Waste Management?
5i Research Answer:
We think GFL runs a much more aggressive growth strategy through leverage and M&A than WCN. GFL has a net debt/EBITDA of 4.9x, while that number for WCN is 2.9x. GFL reinvested cash flow and borrowed more to reinvest heavily back into growing the business, while WCN also reinvested the majority of its cash flow to pursue growth but at the same time pays a growing dividend and repurchases shares occasionally. The market seems to value a more conservative approach by valuing WCN at a premium valuation to GFL. GFL is trading at 15x EV/EBITDA, while WCN’s multiple is 21x. Overall, we prefer WCN, despite its higher valuation, and we think WCN provides a good balance between upside potential and downside protection.