Thursday, March 16, 2017

Even With Strong Growth Prospects, Advanced Disposal Services Looks Pricey

Solid waste stocks have enjoyed a good run of late, and Advanced Disposal Services (NYSE:ADSW), the latest entrant into the publicly-traded group, has gone along for the ride. The enthusiasm isn't unreasonable on the surface, as ongoing growth in housing, economic growth, reflation, and the prospect for a less environmentally-focused administration all support a generally favorable outlook for the industry.

For Advanced Disposal in particular, there are also company-specific drivers that support a bullish growth outlook, including the prospect for further accretive M&A. All of that said, the valuation here seems more than healthy to me, particularly given the company's vulnerability to higher rates and the possibility that interest deductibility may go away in the process of corporate tax reform. While I do like the outlook for growth and expanding margins, I can't get comfortable with paying a double-digit multiple on forward EBITDA nor assuming ongoing double-digit FCF growth on a long-term basis.

Read the full article here:
Even With Strong Growth Prospects, Advanced Disposal Services Looks Pricey

No comments: