Good writeup Marathon, the company has a very strong track record. Apologies if I didn't quite pick it up through the report, but wondering about your view of margins. For what appears to be a very steady earner, EBITDA margins have moved around quite a lot. What do you put the decline to over the last decade and what are you basing the recovery of margins on in your forecasts?
Thanks Luke. That's a fair point and is indeed one area that I would want to investigate further (as you can see in the appendix/further areas for research).
My suspicion is that acquired targets are initially dilutive to margin and then over time efficiencies are captured and improve.
Also the large Progressive merger of 2016 is likely to have taken margins down meaningfully, so I would compare current margins to post 2016.
But you are right it certainly remains an area that requires further work/research.
Good writeup. Throwing it on my list of names to dig deeper into. Roughly, seems hard to like it at current multiples -- but need to understand it better.
Thanks Devin. I agree with you, the multiple is indeed quite high.
However, the value of the landfill network is truly exceptional and very hard to replicate. So I feel the risk of terminal multiple impairment is very low. So over time the growth compounding of FCF/share should overtake the high starting multiple in my opinion.
This is the type of company I like (and I have exposure to several that you compd it to) -- I just generally look for things I can model to be more conservatively mismatched between price and forward expected returns; not because they aren't great businesses, but because I'm compelled to further discount my own ability in assessing them.
Good writeup Marathon, the company has a very strong track record. Apologies if I didn't quite pick it up through the report, but wondering about your view of margins. For what appears to be a very steady earner, EBITDA margins have moved around quite a lot. What do you put the decline to over the last decade and what are you basing the recovery of margins on in your forecasts?
Thanks Luke. That's a fair point and is indeed one area that I would want to investigate further (as you can see in the appendix/further areas for research).
My suspicion is that acquired targets are initially dilutive to margin and then over time efficiencies are captured and improve.
Also the large Progressive merger of 2016 is likely to have taken margins down meaningfully, so I would compare current margins to post 2016.
But you are right it certainly remains an area that requires further work/research.
Good writeup. Throwing it on my list of names to dig deeper into. Roughly, seems hard to like it at current multiples -- but need to understand it better.
Thanks Devin. I agree with you, the multiple is indeed quite high.
However, the value of the landfill network is truly exceptional and very hard to replicate. So I feel the risk of terminal multiple impairment is very low. So over time the growth compounding of FCF/share should overtake the high starting multiple in my opinion.
This is the type of company I like (and I have exposure to several that you compd it to) -- I just generally look for things I can model to be more conservatively mismatched between price and forward expected returns; not because they aren't great businesses, but because I'm compelled to further discount my own ability in assessing them.
That's very sensible - probably a very good way to protect downside risk/capital.