KeyStone’s Stock Talk Podcast Episode 115

Listen to the full podcast here.

This week in KeyStone’s Stock Talk Podcast, we pose the question as to whether the Stock Market is Showcasing Economic Reality, as the S&P 500 hits all-time highs after a rapid V-shaped recovery from the initial COVID-19 induced sell-off.

In our Your Stock, Our Take segment we start by taking a look at Canadian micro-cap, C-COM Satellite Systems Inc. (CMI:TSX-V), a leading global provider of mobile auto-deploying satellite antenna systems. A listener who had made a great return on our recommendation on the stock in the past, asks us our take on the stock today.

Our second YSOT, is a significantly larger business, US-based Yeti Holdings Inc. (YETI:NYSE), a global designer, retailer, and distributor of premium outdoor products. The stock, which went public in October of 2018 at $17.00, has seen its share price jump 209% since this time. A listener asks how the company’s current valuations stack up to our models.

Our third question came in on GFL Environmental Inc. (GFL:TSX), a large cap, environmental services company in North America, providing services such as non-hazardous solid waste management, infrastructure & soil remediation and liquid waste management throughout Canada and in 23 states in the United States. A listener mentioned seeing a “Short Report” on this relatively newly listed public company and asked us our take on the stock from a fundamental perspective.

Canucks round 2 – evicted the reigning Stanley Cup champions from the Bubble. We got a day to celebrate…and then received a rude awakening at the hand of the Vegas Golden Knights.

Brennan wanted to take a stab at the intro topic this week – so have at er my friend..


Is the Stock Market Showcasing Economic Reality?

It’s been just over 6 months since the COVID-19 pandemic has rocked the globalized world, causing one of the largest and fastest broad-based market selloffs in history. And personally, to my surprise, we have experienced a rapid V-based recovery in the months following, with the S&P 500 now reaching an all-time record high. Almost as if the COVID-19 pandemic wasn’t a cause for concern.

So, the question that I want to pose for discussion is, “are the markets showcasing economic reality?”

First of all, I want to make sure that our listeners understand that I am not fear-mongering – we have no idea if there will be another correction tomorrow, or if this is the beginning of a new Bull market that will last for 5 years. But what we do know is that at the current level, markets are relatively pricey. And this is not to say there will not be money to be made in stocks, but we as analysts, and you as investors, need to be more selective and cautious with your capital as you deploy it. Making sure you are investing in quality stocks that offer growth at a reasonable price – as it is here where there is money to be made. And it should serve as a case study that after the 2008 financial crisis, Ryan and Aaron were able to uncover portfolio changing stocks.

So, let’s look at what we know, now that the markets are at all time highs:

  • Many companies have begun to post what many management teams say are going to be their most affected quarters by COVID-19 (which is Q2, 2020), and we can tell you from our research that a lot of these financial results have been dismal – but many companies have also continued to post impressive results. One of these names from our coverage is XPEL Inc. which Ryan touched on as our Star last week.
  • Bankruptcies have raged on in 2020:
    • Prominent Retail bankruptcies include:
      • Pier 1 Imports, Roots USA, JCPenney, GNC (which we actually posed for concern in one of our past Dog segments almost a year ago where we said their debt was unsustainable), Lord & Taylor (Oldest U.S. Department Store) and I would imagine more are to come.
    • But what about smaller, private businesses that we do not have much data on?
      • Yelp, the online reviewer is showing that over 80,000 businesses in the U.S. have shut their doors permanently between March 1 to July 25th.
  • You would expect that this trickle-down effect of less jobs, less money in circulation and spending would slowly affect the economy – but will it?
  • The ending of government wage subsidies, and debt payment deferrals.
    • Have these benefits to society softened the blow, or just postponed the economic impact?

So again, are the markets showcasing economic reality based on what I have outlined which include:

  • Weak Q2, financial results
  • Numerous public and private company bankruptcies
  • The end of wage subsidies



You talked about a V shaped recovery – the stock market. Many sectors on Main Street are not experiencing this. That is the crux of the argument.

Retail – of you were not on a strong footing, you are dead. But those that were on a strong footing. There is the potential to survive and thrive. Clothing for example – despite Aaron’s protests, we will continue to need clothes. Those that survive could have less competitors.

Commercial Aerospace…so much uncertainty.


Your Stock, Our Take

Marvin – via email.

GFL Environmental has been in the news lately and the stock has dropped after a short report was issued. Do you agree with the contents of the short report or is there an opportunity to invest on the pullback?


GFL Environmental Inc. (GFL:TSX)

Current Price: $24.66

Market Cap: $8 billion

What does the company do?

GFL is a large cap, environmental services company in North America, providing services such as non-hazardous solid waste management, infrastructure & soil remediation, and liquid waste management throughout Canada and in 23 states in the United States.

Key Points:

GFL is a relatively new entrant to the public markets and commenced trading on the TSX in March of this year.

The stock performed relatively well over the subsequent 5 months up 36% until it hit a high in early August. Since then, the stock has declined nearly 20%.

GFL was the subject of a short report issued by Spruce Capital on August 17th. I have not personally read the short report and since the GFL is not under current coverage or really even in our monitor list, I don’t plan on reading the report anytime in the future.

What I have done is looked at the financials of the company to see if it would qualify for further research at KeyStone. Based on what I have seen, the company would not meet our investment criteria.

Recent Financial Performance

  • GFL is a growth by acquisition story. The company announced over US$800 million in acquisitions in June and an additional US$1.2 billion acquisition in August.
  • Growth by acquisition can be a very lucrative strategy if it is executed properly. It appears that GFL may be trying to emulate other successful stories in their industry such as fellow TSX listed company Waste Connections.
  • However, from our perspective, the key ingredient that GFL lacks is current profitability. They have not yet proven that their own business is profitable, and this makes a rollup strategy very risky.
  • It also means that the company is more dependent on raising debt and issuing new shares.
  • In the second quarter of 2020, the company reported revenue of $993 million which was up 19% compared to the previous year and reported net loss was $115 million, or $0.32 per share. GFL did report adjusted net income of $0.03 per share but this is very slim profitability.
  • Net debt as of the end of Q2 was almost $4.5 billion and the company announced an additional US$750 million debt financing for its recently announced acquisition.


To answer Marvin’s question, we do not see GFL as a buying opportunity at present. I am not in any way supporting the specific claims of the short report. However, based on the current financial performance, debt leverage and strategic focus, we would consider GFL to be high risk and it would need to prove the validity of its business model before we would ever recommend it.

Short-Reports Generally – some offer great insight and can uncover fraud, some are opportunistic and based mostly on speculation, and others are not worth the paper they were written on. One company in our coverage, for example,  Trulieve Cannabis Corp. (TRUL received a short report in December…the shares


Your Stock Our Take

Alex via Email

C-Com is a company you recommended in the past and I did well on. What is your take on it today?


C-Com Satellite Systems Inc. (CMI:TSX-V)

Current Price: $3.00

Market Cap: $115 Million

Yield: 1.8%

What does the company do?

Designs, develops, and manufacturers transportable and mobile satellite-based antenna systems. The company has developed proprietary, auto-acquisition controller technology for rapid antenna pointing to a satellite with just the press of a button, enabling Broadband Internet via Satellite across a wide range of market applications worldwide, including regions unserved or underserved by terrestrial access technologies.

What is Driving the Stock?


C-Com is currently developing some interesting new technology – primarily its  Ka-band, electronically steerable, modular, conformal, flat panel phased array antenna. The theory is, with thousands of new satellites are going to be launched in the next couple of years from high profile companies like SpaceX, Amazon, Google, Telesat and others – they  are changing the way broadband Internet is going to be delivered around the globe. C-Com can potentially benefit from this and investors are speculating on future business.

Currently however…

Recent Financial Results: (Q2 2020)

  • Revenues dropped 58% to $1.06 million.
  • The company reported a net after tax loss of $466,930 or -1 cent per share compared to a net after tax profit of $267,342 or 1 cent per share for Q2
  • The Q2 net after tax loss incorporates a onetime expense of $316,498 ($430,609 pre-tax). Excluding the impact of this onetime expense, the net after tax loss reduces to $150,432.

In Q2 the company continued to experience a slowdown impacted by the global shutdown. The OPEC oil production dispute that had dampened activity of C-Com’s oil sector customers spilled into the early part of the quarter.

Our Take:

C-Com has a great balance sheet with roughly $14 million in cash and zero debt, and a good deal of current tech and interesting future developments. However, the business is contract driven with limited recurring revenues and, as a result, low predictability. While the potential of the company serving a satellite boom is intriguing, it is speculation at this point. Based on current cash flow and earnings, the stock is richly valued. Quarterly results can be lumpy and can greatly uptick on a couple large orders, but CMI paid its dividend out of cash in the latest quarter, not operational cash flow.

The company has takeover target potential given its technology and strong balance sheet, but the global shutdown will make 2020 a challenging year for C-Com and the gains in 2020 appear to be based on future speculation rather than current operational gains. We monitor, but would not buy C-Com at present valuations.

Your Stock Our Take

Tyler via Email


Yeti Holdings Inc. (YETI:NYSE)

Current Price: $51.43

Market Cap: $4.4 Billion

What does the company do?

YETI is a global designer, retailer, and distributor of premium outdoor products. From coolers and drinkware to backpacks and bags, the company’s products are built to meet the unique and varying needs of diverse outdoor pursuits, whether in the remote wilderness, at the beach, or anywhere life takes its customers.

Key Points:

Yeti is a relatively new story, with the stock IPOing in October of 2018 at a price of approximately $17.00, and since then the stock has performed very well, now up over 209% from its IPO.

This strong share price performance has been driven by solid growth in the company’s financials. Just to give you an idea of the company’s revenue trajectory, (TTM) revenue for this period increased 14.5% compared to the same period last year, which ranged from Q2, 2019-Q3,2018.

Recent Financial Results: (Q2, 2020)

  • Revenue was up 7%, to $246.9 million, compared to the same period last year.
  • Adjusted EBITDA increased 24% to $57.9 million.
  • Adjusted Earnings Per Diluted Share (EPS) increased 38% to $0.41 per share compared to $0.30 for Q2 of 2019.

The company has a reasonably healthy balance sheet with a net debt-to-EBITDA multiple of ~1.7x, indicating they should have no problem paying off their debt. And a D/E ratio of ~2.0x which might be getting a little high, but I don’t believe it is any cause for concern.

On a relative valuation basis, the company is trading with a trailing EV/EBITDA valuation multiple of ~24x, which I would say is a premium price for a premium retail good manufacturer and supplier.

Our Take:

I can personally say that Yeti has helped me keep my beer cold on a hot day at the lake. They have certainly grasped the title of the “Cadillac of beer coozies and coolers” and have secured themselves brand recognition for their high-quality products. Just to show you how they have priced their products accordingly, a simple Yeti utility or beach bag can cost you over $200, their drink coozies are around $40 and their coolers range in price from $250-$700.

But ultimately the company has been able to back up their premium products and prices by generating solid financial performance, in both top line revenue and bottom-line profitability growth.

Due to COVID-19 the company has refrained from providing financial guidance for the rest of 2020, but on a trailing basis, they do trade at a premium valuation for a retail good company, and they might not have much room for additional debt on their balance sheet as although their debt multiples are reasonable, they are getting slightly extended to the upper end of where we would like to see them.

The industry that they operate in does have low barriers of entry which could be a cause for concern, as just a quick amazon search for coolers or coozies will find you numerous knockoffs. But again, Yeti has secured themselves solid brand recognition which is positive for the future success of the company. But all-in-all, based on their premium valuation, low double-digit revenue growth and slightly higher debt multiples, right now we do not believe the company offers growth at a reasonable price.


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