Stantec Inc. 2

I do not own this stock of Stantec Inc. (TSX-STN, NYSE-STN). I bought this stock in April of 2008 to make some capital gains. It was a non-dividend paying stock at that point. A lot of people were recommending it as a great stock. The reason it was recommend is that it is in the infrastructure business. There are many that think this company will profit from government money promised for infrastructure building.

When I look at insider trading, I find $1.8M of insider selling and $1.8M of net insider selling. There is a very small amount of insider buying. The insider selling seems to be of options. Not only do insiders have options, but they have option like vehicles like Common Shares Restricted Share Units and Common Shares Deferred Share Units. There are a lot of officers of the company that have options.

There is insider ownership with the CEO having shares worth $4.7M and the CFO having shares worth $1.8M. The Chairman of the Board has shares worth $10.7M. There is a couple of Subsidiary Executives with shares worth over $7M.

The 5 year low, median and high median Price/Earnings Ratios are 15.52, 20.40 and 25.29. The current P/E Ratio is 22.21 based on a stock price of $69.75 and 2013 EPS estimate of $3.14. The P/E Ratio for 2014 is 19.76 based on a stock price of $69.75 and 2014 EPS estimate of $3.53. This is relevant as we are almost to 2014. The P/E Ratios have been moving up as the 10 year median P/E low, median and high median P/E Ratios are at 14.63, 16.68 and 19.65.

I get a current Graham Price of $35.82 and the 10 year low, median and high median Price/Graham Price Ratios are 1.10, 1.36 and 1.54. The current P/GP Ratio is 1.95. The Graham Price for 2014 is at $37.98 and the P/GP Ratio for 2014 is 1.84. This is not much better than the one for 2013 and suggests that the stock price is relatively high.

The 10 year Price/Book Value per Share Ratio is 2.53. The current P/B Ratio is 3.84 a value some 51% higher. This stock price test suggests that the stock price is relatively high.

This stock just started paying dividends so I cannot do a dividend yield test, but I can do a Price/Cash Flow per Share Ratio test. The 5 year median P/CF Ratio is 8.52. The current P/CF Ratio is 16.45, a values some 91% higher. The current P/CF Ratio is based on a stock price of $69.75 and CFPS for 2013 of $4.24. If you look at the P/CF Ratio for 2014 its value is 15.91 based on a stock price of $69.75 and CFPS for 2014 of $4.44.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is $66.90 a price below the current stock price and this implies a loss of 3.14% over the next 12 months with 0.95% from dividends and a capital loss of 4.09%. This does not really jibe with the analysts' recommendation results.

According to the site of North Fork Vue RBC Capital increased their target price on Stantec to $79.00 on December 10, 2013. There is an article in the Edmonton Journal that talks about Stantec stock soaring after good 3rd quarterly results. There is also an interesting blog entry about Stantec's involvement in stream restoration projects. The thing is that I want the companies I invest in to do good things. I am sure other people feel the same way.

Both the P/B Ratio and P/CF Ratio tests show that this stock is overpriced. This is not surprising considering the stock price is up by 75% this year and was also up last year by some 44%. I still think this is a good company, but to make money on a stock over the longer term, it is important not to pay too high a price for it. See my spreadsheet at stn.htm.

This is the second of two parts. The first part was posted on Thursday, December 19, 2013 and is available here.

Stantec, founded in 1954, provides professional consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics for infrastructure and facilities projects. We support public and private sector clients in a diverse range of markets, at every stage, from initial concept and financial feasibility to project completion and beyond. Their services are provided on projects around the world operating out of more than 170 locations in North America and 4 locations internationally. Its web site is here Stantec.

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 or StockTwits.