Stantec, Inc. – Value Analysis (NYSE:STN) : November 14, 2017

Capitalcube gives Stantec, Inc. a score of 56.

Our analysis is based on comparing Stantec, Inc. with the following peers – Tetra Tech, Inc., Versar, Inc. and Willdan Group, Inc. (TTEK-US, VSRI-US and WLDN-US).

Investment Outlook

Stantec, Inc. has a fundamental score of 56 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It trades at a lower Price/Book multiple (2.14) than its peer median (2.96).
  • The market expects faster earnings growth from STN-US than from its peers and also a turnaround in its current ROE.
  • STN-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • Over the last five years, STN-US‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s relatively high gross margin suggests some differentiation with pricing advantages versus peers.
  • While STN-US‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company is likely overinvesting in a business with only median returns.
  • STN-US has additional debt capacity.

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Leverage & Liquidity

STN-US has additional debt capacity.

  • With debt at a reasonable 21.85% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 17.29%), and a well-cushioned interest coverage level of 7.10x, STN-US has the capacity to borrow some more.
  • All 3 peers for the company have an outstanding debt balance.

STN-US has maintained its relatively high liquidity profile from the recent year-end.

  • STN-US‘s interest coverage has increased 1.26 points from last year’s low but is still below its five-year average interest coverage of 14.48.
  • The increase in its interest coverage to 7.10x from 5.84x (in 2016) was also accompanied by an increase in its peer median during this period to 11.17x from 10.54x.
  • Interest coverage rose 0.63 points relative to peers.
  • STN-US‘s debt-EV is similar to last year’s high of 21.85%, which compares to a low of 7.53% in 2013.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (21.85%) and the peer median (17.29%).

Access the detailed analysis for Stantec, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Tetra Tech, Inc. 12.74 1.94 15.23 46.13
Versar, Inc. 45.54 0.76 -3.67 -42.05
Willdan Group, Inc. 3.82 1.46 103.07 488
Stantec Inc 21.85 1.45 7.1 27.31
Peer Median 17.29 1.46 11.17 36.72
Best In Class 3.82 1.94 103.07 488

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Company Profile

Stantec, Inc. is engaged in providing professional consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management and project economics for infrastructure & facilities projects. It supports its clients through multidiscipline service delivery throughout the project life cycle. Stantec was founded in 1954 and is headquartered in Edmonton, Canada.


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