This May has been a bit of a rollercoaster for investors. Just when markets seemed to be finding their groove, volatility came knocking again. The TSX hit a nearly three-month high on May 12, closing at 25,532.18, thanks in part to easing trade tensions between the U.S. and China. Investors were feeling optimistic after both sides agreed to pause and reduce some tariffs. But like most truce headlines, the boost was short-lived. The very next day, TSX futures slipped again, with everyone suddenly worried about what upcoming inflation data might bring.
It’s a reminder that the market is still skittish. Even with a few good days, uncertainty is hanging around like a rain cloud at a picnic. For Canadian investors, the question is pretty straightforward: Is this dip a red flag or a rare chance to buy stocks on sale?
What to consider
There’s a case to be made on both sides. The bearish view says that inflation hasn’t been tamed yet, interest rates could stay high longer than expected, and corporate earnings might get squeezed in the second half of the year. Plus, after the run-up earlier in 2024, many analysts have said the TSX could be due for a correction of at least 10%. That doesn’t exactly scream “buy the dip.”
But here’s the thing. Canadian stocks are trading at much lower valuations than their U.S. peers. The TSX is still heavily weighted in sectors like mining, energy, and financials, areas that tend to do well when inflation is sticky. And while U.S. markets are driven by tech names trading at eye-watering multiples, Canada’s market looks more grounded in comparison. That’s the opportunity.
A stock to watch
One stock that stands out in this environment is GFL Environmental (TSX:GFL). It’s not a household name yet, but it should be. Headquartered in Vaughan, Ont., GFL is one of North America’s largest providers of environmental services. It handles everything from waste collection and recycling to soil remediation and liquid waste. The diversified environmental services company operates across Canada and in 18 U.S. states, giving it both domestic strength and international reach.
In the first quarter of 2025, GFL posted a net loss from continuing operations of $213.9 million. That’s wider than the $195.8 million loss in the same quarter last year. So, not exactly a blockbuster bottom line. But context matters. GFL is in the middle of a major strategic pivot. It’s selling off its hazardous waste division, a move that’s expected to bring in a whopping $5.6 billion, including $4.3 billion in cash.
A steady stream
What’s the plan with all that cash? Pay down about $2.6 billion in debt and buy back stock. That’s music to long-term investors’ ears. Reducing debt strengthens the balance sheet, and repurchasing shares boosts value for those who hold onto the stock. GFL is aiming to get its debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) ratio down to around three times, which would put it in line with industry giants like Waste Management and Republic Services.
There’s more. At its investor day this year, GFL said it plans to grow its EBITDA nearly 20% a year over the next three years. It’s also aiming for $2.70 in free cash flow per share by 2028. If that happens, and it’s always an if in the stock market, then a share price of $65 could be justified. That’s about 45% higher than where the stock trades today. Not bad for a company that picks up your trash.
Bottom line
Beyond the numbers, what makes GFL compelling right now is the nature of its business. Waste management is essential. It doesn’t go out of style when interest rates rise. People need their garbage collected in good times and bad. And governments and businesses need environmental services that meet increasingly strict regulations. That kind of reliable demand provides some protection during economic downturns.
So, is this market dip a risk or an opportunity? The honest answer is it’s a bit of both. Volatility isn’t going anywhere anytime soon, and caution is still warranted. But for those with a long-term view and a stomach for some bumps, selectively buying into high-quality, under-the-radar names like GFL could set the stage for some serious gains down the line.
