Tuesday, July 19, 2011

SNC-Lavalin Group Inc 2

I own this stock (TSX-SNC). I bought this stock first in December 1998. I sold some in July 2008. To date I have a total return of 30% per year on this stock. Only 1.8% of this total return can be attributed to dividends. This stock is considered to be a dividend paying growth stock. The current dividend yield is 1.5% and this is above the 5 year median dividend yield of 1.1%.

As with other companies that are liberal with stock options, there is some $26.8M of insider selling under this company. The vast majority appears to be stock options of officers at $25.4M. There are an awful lot of officers at this company receiving stock options. Both the CEO and officers of this company have more options than shares. The CFO and Directors do not. For example, at present prices, the CEO has $5.1M of shares and $16.5M of options.

Some 137 institutions own 42% of this company. There was both buying and selling over the 3 month period. However, institutions have increased their shares by 1.8M over the past 3 months. This is an increase of $99M in their investment in this company.

For the 5 year median Price/Earnings Ratio, I get a low of 14.6 and a high of 28. The current one of 20.1 is just above the 5 year median P/E of 21. So, this shows a relatively reasonable stock price. I get a Graham Price of $27.67 and the current stock price of $55.35 is some 100% above this. The median difference over the past 10 years of Graham Price and stock price is 102%, so relatively speaking the stock price is reasonable. (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value Ratio of 5.06 and a current one of 4.47. The current one is some 88% of the 10 year median and also points to a current reasonable stock price. The last thing to look at is the dividend yield. The current one at 1.52% is higher than the 5 year median one of 1.1% and therefore shows a very good current stock price. (Also, the 10 year median high yield is also lower at 1.45%.) So, my spreadsheet points to a relatively good stock price.

When I look at analysts’ recommendations I find a number of Strong Buy, lots and lots of Buy and at least 1 Hold recommendations. The consensus is probably a Buy. Buy recommendations come with a 12 months stock price between $66 and $68.

Some analysts are concerned about their projects in the Middle East in connection with unrest there. Stock price has recently decreased because of this. Many feels this provides are good buying opportunity. Some think it is not the time to buy because of difficulties in the Middle East. However, this probably depends on whether you buy stocks for the short term or the long term. They are especially hit because of problems in Libya. The company does have projects all around the world.

I plan to continue to hold this stock in my portfolio. I will not be buying more at present because I already have enough invested in this company.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. Thanks for this review. A return of 30% per year is quite impressive. Could be a good stock to increase my margin value. However, the dividend is little. But seem like quite often, the more quality there is in a stock, less is the dividend.

  2. Dividend yield is a percentage of the stock price. With regular dividend increase, yet the yield stays low. This must mean the stock price is going up which is good. So, a low yield does not mean you are getting a small dividend.


  3. I'm going to add return on equity as another important thing to look at when picking stocks.
    I'm definitely putting this one on my buy list, thanks for the review.