Is it a good company at a reasonable price? I think the current price might be on the expensive side. There is a big divergence of opinion on this stock. Even in my investment club, one person thought it was a great stock and another did not like it at all because it is just doing acquisition. Personally, for me to like this stock, I would like to see it make some money. The Adjusted EPS does imply that it is. I am adding this stock to the list of stocks that I follow. Love it or hate it, it will be interesting to see where it goes.
I do not own this stock of GFL Environmental Inc (TSX-GFL, NYSE-GFL). GFL Environmental (TSX:GFL) is small, pays dividend and talked about by Amy Legate-Wolfe on Motley Fool
When I was updating my spreadsheet, I noticed this stock came on TSX in March 2020. It pays a dividend, but the dividend is so low, you wonder about it being a dividend paying stock at all. It is growing fast, but only by acquisitions.
If you had invested in this company in March 2020, when it was first issued, for $1,008.00 you would have bought 45 shares at $22.40 per share. In December 2021, after 2 years you would have received $49.23 in dividends. The stock would be worth $2,152.35. Your total return would have been $21,366.56.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $22.40 | $1,008.00 | 45 | 2 | $49.23 | $2,152.35 | $2,201.58 |
The dividend yields are very low with dividend growth moderate. The dividend yield is low (below 2%) at 0.16%. This is a very low yield. The company has increased the dividends twice, once in 2022 (for 10%) and once in 2023 for 9.1%. The dividend increases are in the moderate area (8% to 14% ranges).
The Dividend Payout Ratios (DPR) are low, so very good. I cannot calculate the DPR for EPS because this company has yet to make a profit. There is Adjusted Earnings per Share (AEPS) data. The DPR for AEPS for 2021 is 13%. Dividends so far been paid only in 2020 to 2022. The DPR for Cash Flow per Share (CFPS) for 2021 is 2.13%. The DPR for Free Cash Flow (FCF) for 2021 is 2.8%.
Debt Ratios are need improving. The Long Term Debt/Market Cap Ratio for 2021 is 0.44. It has been higher in the past and for the Second Quarter of 2022 it is higher at 0.61. This is both because of higher debt and low stock price. The Liquidity Ratio for 2021 is 0.98 and that is low. If you add in Cash Flow after dividends it is 1.56. The current Liquidity Ratio is lower at 0.63. If you had in cash flow after dividends it is still low at 1.15. I prefer this ratio be 1.50. The Debt Ratio for 2021 is 1.46. I also prefer this ratio to be 1.50. The Leverage and Debt/Equity Ratios for 2022 are too high at 3.18 and 2.18. I prefer them to be below 3.00 and 2.00.
The Total Return per year is shown below for 2 to the end of 2021 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2019 | 2 | 10.00% | 46.30% | 46.13% | 0.17% |
The Total Return per year is shown below for 2 to the end of 2021 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 10.00% | 50.28% | 50.10% | 0.18% |
The 2-year low, median, and high median Price/Earnings per Share Ratios are all negative and so unusable.
We have Adjusted Earnings per Share (AEPS) data. The P/AEPS P/E 2-year low, median, and high median Price/Earnings per Share Ratios 87.90, 128.94 and 169.98. The current P/AEPS ratio is 52.26 based on AEPS estimate for 2022 of $0.57 and a stock price of $29.54. The current ratio is below the 2 year low ratio. By this measure the stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get similar results with CDN$.
I get a Graham Price of $16.91 (based on AEPS). The 2-year low, median, and high median ratios are 2.59, 3.56 and 4.53. The current P/GP Ratio is 2.34 based on a stock price of $37.97. The current ratio is below the low ratio of the 2 year low ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$/
I get a 3-year median Price/Book Value per Share Ratio of 1.66. The current P/B Ratio is 2.32 based on a stock price of $37.97, Book Value of $4,824M, and Book Value per Share of $12.71. The current ratio is 40% above the 3 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$ and you will get similar results with CDN$.
I get a 3-year median Price/Cash Flow per Share Ratio of 18.45. The current P/CF Ratio is 11.44 based on Cash Flow per Share estimate for 2022 of $3.32, Cash Flow of 1,260M and a stock price of $29.54. The current ratio is 38% below the 3 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a 2-year median dividend yield of 0.14%. The current yield is 0.16% based on dividends of $0.05 and a stock price of $29.54. The current dividend yield is 16% above the 2 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$. In CDN$ you get a cheap price, but dividends are paid in US$.
The 3-year median Price/Sales (Revenue) Ratio is 1.12. The current P/S Ratio is 2.20 based on Revenue estimate for 2022 of $5,093M ($6,488M CDN$) and a stock price of $29.54. The current ratio is 96% above the 2 year median P/S Ratio. By this measure the stock price testing suggests that the stock price is relatively expensive. This testing is in US$ and you will get similar results with CDN$.
Results of stock price testing is that the stock price is probably expensive. I have little data to go on. The dividend yield test says cheap, but this is not confirmed by the P/S Ratio test. The stock price has increased a lot since it started. This is a solid waste management business, not a tech stock. So, I am going with expensive. Of course, I can be completely wrong.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (8), Hold (1), and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $49.00. This implies a total return of 29.21% with 29.05% from capital gains and 0.16% from dividends.
All the analysts rate this stock on Stock Chase as Do Not Buy. They say that it is struggling to make a profit and it is overpriced. Stock Chase gives this stock a rating of 3 stars out of 5. Daniel Da Costa on Motley Fool says it is a good defensive stock to buy. The company has put out a Press Release for their fourth quarter results. The company has put out a Press Release on their second quarter of 2022 results. A Simply Wall Street report on Yahoo Finance says this company is undervalued and worth $63.49 CDN$. Simply Wall Street gives two warnings of significant insider selling over the past 3 months and shareholders have been diluted in the past year.
GFL Environmental Inc. provides environmental services principally in North America. It offers non-hazardous solid waste management, infrastructure & soil remediation, and liquid waste management services. Its web site is here GFL Environmental Inc.
The last stock I wrote about was about was Badger Infrastructure Solutions Ltd (TSX-BDGI, OTC-BADFF) ... learn more. The next stock I will write about will be Aecon Group Inc (TSX-ARE, OTC-AEGXF) ... learn more on Friday, August 19, 2022 around 5 pm. Tomorrow on my other blog I will write about Buy Canadian Banks .... learn more on Thursday, August 18, 2022 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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