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Yahoo
7 days ago
- Business
- Yahoo
Can Mixed Fundamentals Have A Negative Impact on GDI Integrated Facility Services Inc. (TSE:GDI) Current Share Price Momentum?
Most readers would already be aware that GDI Integrated Facility Services' (TSE:GDI) stock increased significantly by 8.0% over the past month. However, we decided to pay attention to the company's fundamentals which don't appear to give a clear sign about the company's financial health. Specifically, we decided to study GDI Integrated Facility Services' ROE in this article. Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. The formula for return on equity is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for GDI Integrated Facility Services is: 7.6% = CA$38m ÷ CA$503m (Based on the trailing twelve months to March 2025). The 'return' is the profit over the last twelve months. Another way to think of that is that for every CA$1 worth of equity, the company was able to earn CA$0.08 in profit. Check out our latest analysis for GDI Integrated Facility Services We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company's earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features. On the face of it, GDI Integrated Facility Services' ROE is not much to talk about. A quick further study shows that the company's ROE doesn't compare favorably to the industry average of 9.7% either. Therefore, it might not be wrong to say that the five year net income decline of 9.5% seen by GDI Integrated Facility Services was probably the result of it having a lower ROE. We believe that there also might be other aspects that are negatively influencing the company's earnings prospects. For instance, the company has a very high payout ratio, or is faced with competitive pressures. However, when we compared GDI Integrated Facility Services' growth with the industry we found that while the company's earnings have been shrinking, the industry has seen an earnings growth of 6.7% in the same period. This is quite worrisome. The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is GDI fairly valued? This infographic on the company's intrinsic value has everything you need to know. Because GDI Integrated Facility Services doesn't pay any regular dividends, we infer that it is retaining all of its profits, which is rather perplexing when you consider the fact that there is no earnings growth to show for it. So there might be other factors at play here which could potentially be hampering growth. For example, the business has faced some headwinds. In total, we're a bit ambivalent about GDI Integrated Facility Services' performance. While the company does have a high rate of reinvestment, the low ROE means that all that reinvestment is not reaping any benefit to its investors, and moreover, its having a negative impact on the earnings growth. Having said that, looking at current analyst estimates, we found that the company's earnings growth rate is expected to see a huge improvement. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
The Market Online
21-05-2025
- Business
- The Market Online
A facility services value stock backed by profitable growth
GDI's investment highlights C$2.6 billion in revenue and C$137 million Adjusted EBITDA. 53 acquisitions sine 2008 including 32 closed since TSX IPO in 2015. Significant opportunity for growth in the U.S. market. Trading at all-time low valuation multiples post-COVID normalization. The rational investor builds conviction in a company through data, steering clear of the narratives and heightened emotions driving the hot stocks of the week. This approach is the surest way to keep a portfolio aligned with long-term value creation but requires constant discipline, based on a thorough due diligence process, to identify the pillars of a worthwhile investment. We can break these pillars down as follows: A proven track record of profitable growth. A target market with strong long-term prospects. Leadership optimally fit to convert these prospects into shareholder value by delivering on the income statement and balance sheet. While by definition elusive, companies that tick these three boxes are present in every industry, often lingering in obscurity because of their small size, understated business and/or absence from the news headlines. A proven compounder with a long-term runway Suppose you begin your search for your next investment encyclopedically, a la Warren Buffett, starting from the A companies listed on the TSX and working your way down, scouring press releases, decks and financial statements, adding high-potential prospects to your watchlist along the way. Not far into the Gs, keeping the bullet points above in mind, you'd likely stop for a closer look at GDI Integrated Facility Services (TSX:GDI), market capitalization C$808.26 million, struck by how the stock seems to be short-changing the underlying company's impressive operational history, including 53 acquisitions since 2004 (32 since it went public on the TSX in 2015) and revenue growth from C$600 million in 2014 to C$2.6 billion in 2024, suggesting the potential for significant value to be harvested over the long term. GDI is Canada's largest integrated facility services provider and one of the top-3 largest in North America, including a high-growth platform in the United States. The company provides commercial janitorial services as well as maintenance, repair and replacement services for most of the equipment in buildings – HVAC, building automation systems, boilers, chillers, etc. It also services the full range of facility types – office buildings, universities and schools, data centers, distribution centers, industrial spaces, healthcare environments, stadiums, hotels, shopping malls and airports. The company's acquisition strategy, focused on principled management teams, strong cultures and strategic regions and business lines, has resulted in one of the most diversified facility service offerings on the continent. It's under this holistic framework that GDI has managed to compound revenue at 19.8% annually from C$169 million in 2008 to C$2.55 billion in 2024, supported by adjusted EBITDA compounded at 18.6% from C$10.6 million to C$137 million, respectively. From a shorter-term perspective, the company has been no less impressive, growing revenue every year over the past five years while generating positive net income, laying the foundation for strong conviction in continued profitable growth. GDI's shares represents a meaningful opportunity given the stock's over 40% decline from its all-time-high in 2021. As an essential services provider, the company dramatically outperformed during the COVID pandemic delivering unsustainably high levels of profitability. As its business normalized in the years post-COVID, its trading multiple has fallen well below pre-COVID levels. If GDI continues to deliver on its proven growth strategy and its trading multiple reverts to historic averages, the shares should deliver outsized returns. Let's analyze GDI's business segments and get meticulous about what this conviction is made of. Business Services Canada segment The company's North American presence is anchored by a leadership position in the Canadian market. Its Business Services Canada segment is the country's largest commercial cleaning operation, significantly larger than its nearest competitor, with two brands specializing in strategic segments of the industry: GDI Integrated Facility Services, the top janitorial provider in all major Canadian markets, focuses on mid-to-large commercial, industrial and institutional facilities in primary markets. Modern Cleaning Concept operates a franchise model equipped to serve multi-location portfolios, such as retail chains, in smaller secondary and tertiary markets. With the largest market share and most entrenched company in Canada, the Business Services Canada segment has grown revenue by approximately 2.5% per year from C$452 million in 2014 to C$585 million in 2024. After normalizing from significant earnings growth during COVID, the business has delivered an adjusted EBITDA margin of 7% each quarter for the past five quarters. Business Services USA segment GDI's Business Services USA segment employs more than 15,000 people and serves clients in 40 states with a focus on commercial janitorial services for the office, education, industrial, healthcare and food sanitization markets. GDI entered the U.S. market with its first acquisition in 2012. The company has made a total of 12 acquisitions in this segment to date and has an office in 15 U.S. cities while serving clients across 40 states. The purchase of Atalian in 2023 stands out as one of its largest and most strategic, adding 2,000 employees with a strong presence in New York, complementing the five-borough presence of its Ainsworth Technical Services segment covered below. Business Services USA has grown revenue by 24% per year since the company's IPO in 2015 to reach C$884 million in 2024. During the same period the segment grew adjusted EBITDA over 6 times from C$9 million to C$55 million. While organic revenue declined in 2024 from the loss of the segment's largest client in Q1 2024, as well as from exiting lower-margin contracts to improve Atalian's margins, GDI has since retraced these dips and is expecting organic growth to reach the historic average by the end of 2025. Business Services USA represents a very large potential for growth. There are over 50 U.S. metro area with a population of 1 million or more, and GDI currently has an office in only 15 of them. With the competitively fragmented (slide 10) and growing US market, which is valued at more than US$300 billion, GDI has a long runway for continued growth by executing on its proven acquisition strategy. Technical Services segment Continuing on our survey of GDI's efficient operations, we have the Technical Services segment, the largest multi-trade services business in Canada, where its technicians are within a one hour truck roll of 90% of the population. GDI entered this business line with an acquisition at the end of 2015 and has grown it to over C$1 billion in revenue through strong organic growth and 19 acquisitions. Operating under the Ainsworth brand, the segment's over 3,500 employees and 2,700 tradesmen have established a leadership position in smart building technologies, while delivering a full suite of HVAC, mechanical, electrical, cabling and energy management services (slide 13), granting it diversified revenue streams across the facility services industry. Technical Services has enjoyed consistent growth as of late, almost tripling revenue from C$375 million in 2019 to C$1.03 billion in 2024, while justifying this greater market share with almost 3x adjusted EBITDA growth from C$21.6 million to C$60 million, respectively, including its strongest Q3 and Q4 to date in 2024 thanks to project-level margin improvements. With 19 acquisitions integrated to date in all major Canadian markets, as well as initial expansion into the US Northwest and Northeast in 2021, GDI intends to leverage the segment's ability to serve clients locally, nationally and on a multi-region basis to reinforce its leadership position. The opportunity to expand this segment in the U.S. market represents yet another long runway for continued growth. GDI posts profitable growth in Q1 2025 GDI's results for Q1 ending March 31, 2025, were marked by profitability and balance sheet optimization. Here are the highlights: Revenue fell by C$28 million or 4% year-over-year (YoY) to C$616 million, largely because of an organic decline of 7% due to a one-time client loss. fell by C$28 million or 4% year-over-year (YoY) to C$616 million, largely because of an organic decline of 7% due to a one-time client loss. Adjusted EBITDA rose by 21% to C$34 million at a margin of 6%, up from C$28 million and 4% YoY. rose by 21% to C$34 million at a margin of 6%, up from C$28 million and 4% YoY. Net income hit C$6 million or C$0.26 per share, up from C$0.4 million or C$0.02 per share YoY. hit C$6 million or C$0.26 per share, up from C$0.4 million or C$0.02 per share YoY. Long-term debt , net of cash, fell by C$14 million during the quarter. Considered alongside the increase in adjusted EBITDA, GDI's leverage ratio now sits below its comfort zone of 3x-3.5x. , net of cash, fell by C$14 million during the quarter. Considered alongside the increase in adjusted EBITDA, GDI's leverage ratio now sits below its comfort zone of 3x-3.5x. Net operating working capital fell by C$9 million in the quarter, reflecting greater efficiencies in billing and project management. The reduction expands to C$53 million since Q3 2023, surpassing the company's C$50 million goal. Let's consider these consolidated results from a segmented perspective to get a better sense of GDI's year ahead. Here's a breakdown: The Business Services Canada segment recorded C$147 million in revenue, up from C$145 million YoY, generating C$11 million in adjusted EBITDA at a margin of 7%. segment recorded C$147 million in revenue, up from C$145 million YoY, generating C$11 million in adjusted EBITDA at a margin of 7%. The Business Services USA segment took in revenue of C$217 million and adjusted EBITDA of C$15 million at a margin of 7%. Revenue declined from C$225 million YoY because of the aforementioned client loss and low-margin contract exits, partially offset by new customer wins. Additionally, revenue from one specific customer fluctuates based on recurring project work volume, which was lower in Q1. segment took in revenue of C$217 million and adjusted EBITDA of C$15 million at a margin of 7%. Revenue declined from C$225 million YoY because of the aforementioned client loss and low-margin contract exits, partially offset by new customer wins. Additionally, revenue from one specific customer fluctuates based on recurring project work volume, which was lower in Q1. Technical Services earned revenue of C$246 million, down from C$260 million YoY, and adjusted EBITDA of C$12 million (5% margin), up from C$6 million (2% margin) YoY. The quarter represents Ainsworth's highest adjusted EBITDA margin in Q1 since acquiring the business in 2015. earned revenue of C$246 million, down from C$260 million YoY, and adjusted EBITDA of C$12 million (5% margin), up from C$6 million (2% margin) YoY. The quarter represents Ainsworth's highest adjusted EBITDA margin in Q1 since acquiring the business in 2015. The Corporate and Other segment took in C$6 million and negative adjusted EBITDA of C$4 million, down from C$14 million and C$2 million YoY, reflecting a divestiture from the segment's distribution business to focus on higher-margin manufacturing both in-house and for a growing list of white-label clients. Claude Bigras, GDI's president and chief executive officer, put these results into context in the Q1 news release, stating that 'each segment delivered profitability levels that were either in-line or above expectations, which contributed to a 21% increase in adjusted EBITDA over Q1 2024. Business Services Canada has been performing well with a very stable margin profile. Organic growth at our Business Services USA segment is expected to show progressive improvement through the year and rebound to more historic levels by Q4. Ainsworth will continue to focus on higher-margin business, and the outlook is positive. I am looking forward to GDI delivering on our expectations for the remainder of 2025.' With a handful of potential acquisitions in the pipeline and a balance sheet healthy enough to wait for undervalued opportunities to present themselves, GDI has set preliminary goals of C$3 billion in revenue and C$200 million in EBITDA on a run-rate basis by the end of 2026 – up from C$2.55 billion and C$140 million in 2024 – keen on expanding its almost two decades of profitable growth and continuing to foster shareholder value with no narrative required, just greater market share and cold, hard cash. A textbook value stock Resistant to recessions thanks to operating in an essential industry and shielded from the news cycle by fitting firmly in the proverbial under-the-radar business category, GDI epitomizes what single stock investors are looking for when they set out in search of the highest probabilities for market-beating returns. The company's strong fundamentals and exponential growth potential, trusted in the right hands, paired with a stock nearly cut in half from its all-time high, offer you exposure to a concentrated, data-driven case for a significant re-rating, one where profitable growth reaches a breakout point and can no longer be ignored by the broader market. Until this moment comes, you have an opportunity to invest at a pessimistic price, which fails to reflect the business' ability to consistently generate cash and bankroll the expansion of its proven acquisition track record. Join the discussion: Find out what everybody's saying about this facility services stock on the GDI Integrated Facility Services Inc. Bullboard and check out Stockhouse's stock forums and message boards. This is sponsored content issued on behalf of GDI Integrated Facility Services Inc., please see full disclaimer here.
Yahoo
03-03-2025
- Business
- Yahoo
Investors in GDI Integrated Facility Services (TSE:GDI) have unfortunately lost 37% over the last three years
As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term GDI Integrated Facility Services Inc. (TSE:GDI) shareholders, since the share price is down 37% in the last three years, falling well short of the market return of around 22%. So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress. See our latest analysis for GDI Integrated Facility Services In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During the three years that the share price fell, GDI Integrated Facility Services' earnings per share (EPS) dropped by 35% each year. In comparison the 14% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 52.55, it's fair to say the market sees a brighter future for the business. The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image). Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here. Investors in GDI Integrated Facility Services had a tough year, with a total loss of 11%, against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for GDI Integrated Facility Services (1 is concerning) that you should be aware of. Of course GDI Integrated Facility Services may not be the best stock to buy. So you may wish to see this free collection of growth stocks. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
