Tuesday, December 27, 2016

Stantec Inc.

Sound bite for Twitter and StockTwits is: Price could be reasonable. You would buy this stock for rising Dividends and Capital Gains. See my spreadsheet on Stantec Inc.

I do not own this stock of Stantec Inc. (TSX-STN, NYSE-STN), but I used to. I bought and sold this stock between 2008 and 2011 and did not make any money. It was a non-core holding. With their new policy of dividends, this stock has become more interesting.

You would buy this stock for diversification reasons. There may be volatility in this stock, especially concerning Earnings and Cash Flow. You should buy it for both rising dividends and capital gain appreciation. You should expect low dividend yield and moderate dividend growth. Over the longer term this sort of stock should have total returns of around 10% per year with 1 to 2% from dividends and the rest from capital gains.

Dividends are low and dividend increases are moderate. The current dividend yield is 1.31% based on a stock price of $34.38 and dividends of $0.45. The dividends have grown by some 10.8% per year over the past 3 years to 2015. The most recent increase was in 2016 and it was for 7.1%. So far they have raised dividends each year since they started them.

They can afford their dividends and they Dividend Payout Ratios are rather low. The DPR for EPS for 2015 was 24.7% and the CFPS was 2.1%.

Growth in Revenues, Earnings and Cash Flow are all above 10% per year over the past 5 and 10 years. So this company has had good growth. For example, the EPS has grown at 10.1% and 12.8% per year over the past 5 and 10 years.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.38, 17.66 and 22.88. The 10 year corresponding values are 15.01, 18.97 and 22.92. The corresponding historical values are 8.19, 14.77 and 23.88. The current P/E Ratio is 25.28 based on a stock price of $34.38 and 2016 EPS estimate of $1.36. The P/E Ratio for 2017 is 18.38 based on a stock price of $34.38 and 2017 EPS Estimate of $1.87. This stock price testing suggests that the current stock price is relatively high, but it could still be in the reasonable price range, but above the median.

I get a Graham price of $20.71 for 2016. The 10 year low, median and high median Price/Graham Price Ratios are 1.11, 1.42 and 1.74. The current P/GP Ratio is 1.66. I get a 2017 Graham Price of $24.28. The P/GP for 2017 would be 1.42. This stock price testing suggests that the stock price maybe in the reasonable range, but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.37. The current P/B Ratio is 2.03 a value some 14.3% lower. The current P/B Ratio is based on a stock price of $34.38 and PVPS of $16.93. This stock price testing suggests that the stock price is reasonable and below the median.

The current dividend yield is 1.31%. The 3 year median dividend yield is 1.24%. This makes the current dividend yield some 5.9% above the 3 year median. This suggests that the stock price is reasonable and below the median. However, dividends have not been paid for long, so you wonder how valid this test is.

The 10 year median P/S Ratio is 1.21. The current P/S Ratio is 1.25 based on 2016 Revenue estimate of $3.124M ($27.42 per share). The P/S Ratio for 2017 is 1.05 based on 2017 Revenue estimate of $3738M ($32.81 per Share). This all suggests that the stock price is probably reasonable.

When I look at analysts’ recommendations, I find Buy and Hold recommendations with most being Holds. The 12 month stock price consensus is $36.23. This implies a total return of 6.69% with 1.31% from dividends and 5.38% from capital gains.

This Wall Street Transcript talks about this company and Local Motors going into a strategic alliance to accelerate the worldwide implementation of connected automated vehicles. Ruchi Gupta says in this Money Making Article says that analysts give this stock 1 Buy, 0 sells and 7 Holds. See what analysts are saying about this company on Stock Chase. Most like this company, but a few feel it is overpriced.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report hereand here.

The last stock I wrote about was about was Colliers International Group Inc. (TSX-CIG, NASDAQ-CIGI)... learn more . The next stock I will write about will be Methanex Corp. (TSX-MX, NASDAQ-MEOH)... learn more on Wednesday, December 28, 2016 around 5 pm.

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 Inc.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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