Analysts still confident in GFL Environmental in wake of negative report from short-seller
A number of analysts are reiterating their confidence in GFL Environmental Inc. after the stock lost as much as 10 per cent of its value on Tuesday following the release of a negative report from an activist short seller.
New York-based Spruce Point Capital Management Inc. published a 107-page “strong sell” report earlier this week that questioned GFL’S roll-up business model and highlighted alleged inconsistencies in its accounting. In a statement, GFL said the report contained “numerous inaccuracies and mischaracterizations” and was “without merit.”
At least four analysts from major U.S. and Canadian banks have since reaffirmed their positive outlooks on the waste management company’s prospects.
Goldman Sachs analyst Brian Maguire was one such analyst. Maguire upgraded the stock to a “buy” and raised his 12-month price target on the Tsx-listed shares — which closed Thursday at $25.45 — to $32.
“We are encouraged by management’s ability to prove out its growth strategy through multiple transformative acquisitions,” Maguire wrote. “As a result, we upgrade shares to Buy to reflect GFL’S industry-leading growth trajectory while still trading at a 1.7x EBITDA multiple discount to solid waste peers.”
Maguire directly addressed some of the concerns that Spruce Point raised about GFL’S accounting, arguing that variations in the numbers GFL used for capex in its financial statements were normal and reflected differences in when that equipment was put into service and when cash payments for it were made.
National Bank of Canada, Stifel Financial Corp and Jefferies all also published defences of GFL.