JCP Investment Pushes for Board Shakeup at Casella Waste Systems Inc. (CWST), Cites Potential for Sale

Casella Waste Systems Inc. (NASDAQ:CWST) is a small waste services company based in Vermont with operations in six states in the Northeast. For its fiscal year 2014 the company achieved $530 million in revenues. Shares of Casella are cheap, but for a reason: Casella is trading at 2.0 times EBITDA because it has a ton of debt. Debt-to-EBITDA at the end of the first quarter was about 5.5 times. Compare this with the larger waste services companies like Waste Management, Inc. (NYSE:WM) and Republic Services, Inc. (NYSE:RSG), which have debt-to-EBITDA figures of 2.6 times and 3.2 times respectively. Keep in mind, Waste Management has a $23 billion market cap, while Republic Services’ stands at $6 billion, and Casella’s at just $220 million.

Casella has a heavy debt load but the company is projecting $14 to $18 million in free cash flow for 2015. For the remainder of the year, the company will focus on increasing cash flow and reducing debt so margins will improve. We believe if JCP can get the company to make the necessary changes,  shares will appreciate. Likewise, if JCP can help push the company towards a sale, that will likewise result in a strong return for shareholders.

Out of the funds we track, Peter Keane’s Keane Capital Management is the largest investor in Casella Waste Systems with almost 770,000 shares valued at $4.2 million as of March 31. George McCabe’s Portolan Capital Management and John Zaro’s Bourgeon Capital also have stakes in Casella.

Disclosure: None