The Motley Fool

A $2 billion IPO Could Throw This Recession-Proof Industry for a Loop

Image source: Getty Images

Chances are you’ve seen their lime green trucks going about their business, keeping the city clean. Similar to other visible public services companies whose vehicles you’ll see dotted around your city, such as Enbridge and Badger Daylighting, GFL Environmental seems a solid business to invest in, and one that is sure to out ride the economy no matter what curve balls it may pitch at shareholders.

However, you can’t buy shares in GFL Environmental – at least, not yet. That might be about to change this fall, though, if the waste management company goes ahead with its initial public offering (IPO). According to a report in The Globe and Mail, GFL Environmental is looking to raise somewhere in the region of $1.98 billion in an IPO that would see a major new waste industry ticker added to the TSX, as well one of the U.S. stock exchanges.

Investors could reap great potential upside if this company goes public

With investment banks on board to advise on the decision, including Goldman Sachs Group, J.P. Morgan Chase, and two major Canadian bankers, some serious numbers are being tossed around. Pulling in $3.5 billion in annual revenue, with EBITDA of $1 billion, GFL Environmental would utilize the IPO to invest in growth to become one of the biggest North American waste industry players.

On its way to becoming the fourth-largest operator in its space, either public or private, it seems the sheer scale of its business may make an IPO an inevitability. Growth in the U.S. looks set to continue, and if the public listing of GFL Environmental stock takes place this fall, a subsequent forward push south of the border as well as here in Canada could see the company become one of the top players in the waste management industry.

5 TSX Stocks Under $5

Click here to learn more!

Is there anything to compare GFL Environmental with on the TSX?

To get an idea of where GFL Environmental stock could be in a few years, take a look at Waste Connections (TSX:WCN)(NYSE:WCN). North America’s third-largest waste services provider, Waste Connections’ stock sold for around $30 a share five years ago. Today it’s selling for an extra $100 per share.

In other words, if you happen to be bullish on infrastructure and are also looking for recession-proof stocks, you may want to jump on GFL Environmental when it debuts.

Waste Connections pays a small dividend, currently yielding 0.69%, which could increase as growth and profitability continues. It also sets a precedent: if GFL Environmental were to offer a dividend, these two stocks held together in a long-range portfolio could bring in a tidy income over time.

Indeed, GFL Environmental could ultimately go head to head with Waste Connections on the TSX if the former company raises its billion-dollar IPO later this year and goes public.

The bottom line

It’s certainly an interesting time to be picking all-weather stocks to buy and hold through a potential market downturn. While the current sentiment is a neutral one, the amount of possibly catastrophic market stressors on the horizon are a concern for long-range stock portfolio holders. That’s why the appearance of a new waste management ticker on the TSX could offer an exciting additional option for recession-proofing this fall.

5 Canadian Growth Stocks Under $5

We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.

Get Your Free Report Today

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Enbridge and Badger Daylighting are recommendations of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.