'A Good House On A Great Block': Analyst Upgrades Waste Management Firm, Praises M&A Strategy

While GFL Environmental Inc’s GFL stock has significantly underperformed peers year to date, many of the concerns weighing on sentiment are likely to improve over the next six to twelve months, according to BofA Securities.

The Analyst: Michael Feniger upgraded the rating for GFL Environmental from Neutral to Buy, while reducing the price target from $34 to $32.

The Thesis: GFL Environmental is still in a growth phase “relative to the mature peers,” which produces an opportunity for higher returns as the company builds scale, implements automation, and adopts pricing fees, Feniger said.

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“We believe GFL is a ‘good house on a great block’ – disciplined industry, pricing power, positive FCF, no EU/China, ability to grind out EBITDA growth in an uncertain macro – and can narrow the valuation discount over time,” the analyst wrote.

“Going forward, GFL’s M&A strategy is to focus on building density with tuck-in acquisitions within its existing geography – a much lower risk profile,” he added.

GFL Price Action: Shares of GFL Environmental had risen by 1.86% to $25.50 at the time of publication Thursday.