Advanced Disposal Proves A Growth Stock Can Be A Defensive Play

UBS initiated Advanced Disposal Services Inc (NYSE: ADSW) shares with a Buy rating and a target price of $25, implying an upside potential of more than 20 percent from current levels. The firm believes shares of the company are not only attractive but also defensive.

The company came out with 19.25 million shares in a price range of $18–$20, eventually priced at the lower end of $18 earlier this month. The stock opened at $20.50 on October 6 and only once traded below the $19 level — at $18.86 on October 20.

Analyst Steven Fisher said in a research note, "We expect ADSW to reduce leverage over the next few years, taking debt/EBITDA down to below 4.0x from 5.7x prior to the IPO. We expect this to be achieved by a combination of debt reduction and EBITDA growth. As ADSW de-levers and delivers, we expect the multiple to expand to become more in-line with peers over time."

The brokerage listed the following key factors as justification to remain positive on the company's growth prospects:

• There is potential for expansion geographically based on UBS Evidence Lab analysis.
• Macroeconomic conditions, particularly the housing sector, remain encouraging.

At last check, Advanced Disposal was flat on the day, up a penny from the opening price of $20.10.