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.
When I was updating my spreadsheet, I noticed that 2018 was not a good year for this company. Revenue was down 17% and EPS was down 50%. However, the company seems to have recovered nicely in 2019. Both Revenue and EPS was up. This year looks like it will not be quite as good at 2019, but the company is expected to do better in 2021 and 2022. Analysts expect Net Revenue to be up by 5% in 2021 and EPS up by 22% in 2021.
The dividend yields are low with dividend growth moderate. The current dividend is low (below 2%) at 1.49%. The 5, and 7 (historical) dividend yields are also low at 1.45% and 1.41%. Dividends were started om 2012. The dividend growth is currently moderate (8% to 14% ranges) at 9.72% per year for the last 5 years. However, the last dividend increase was low (below 8%) at 6.9%. However, a lot of company’s had lower dividend increases in 2020 because of Covid.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2019 EPS was 33% with 5 year coverage at 41%. The DPR for CFPS for 2019 was 2.1% with 5 year coverage also at 2.1%. The DPR for Free Cash Flow is 16% with 5 year coverage at 26%. (There is no agreement on FCF, but they are generally not far off.)
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is good at 0.20. The Liquidity Ratio for 2019 is 1.57. The Debt Ratio for 2019 is 1.70. The Leverage and Debt/Equity Ratios are 2.43 and 1.43 respectively.
The Total Return per year is shown below for years of 5 to 25 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 9.72% | 4.26% | 2.82% | 1.43% |
| 2009 | 10 | 9.67% | 10.55% | 9.21% | 1.34% |
| 2004 | 15 | 13.08% | 12.10% | 0.98% | |
| 1999 | 20 | 18.77% | 17.85% | 0.92% | |
| 1994 | 25 | 16.48% | 15.80% | 0.68% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.13, 26.41 and 29.68. The corresponding 10 year ratios are 16.82, 19.47 and 22.92. The corresponding historical ratios are 14.50, 16.44 ad 21.33. The current P/E Ratio is 24.96 based on a stock price of $41.68 and EPS estimate for 2020 of $1.67. The current ratio is above the 10 year high median P/E Ratio. This stock price testing suggests that the stock price is relatively expensive.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, 20 and 25 year periods, I find the following. The total return over the past 10 years is 10.55% per year, the starting P/E Ratio (the one from 10 years ago) was 24.92. I guess that a P/E Ratio of 24.96 is on the high side.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 4.26% | 18.35 |
| 10 | 10.55% | 24.92 |
| 15 | 13.08% | 16.65 |
| 20 | 18.77% | 9.32 |
| 25 | 16.48% | 11.54 |
I get a Graham Price of $26.22. The 10 year low, median, and high median Price/Graham Price Ratios are 1.18, 1.47 and 1.72. The current P/GP Ratio is 1.39 based on a stock price of $41.68. The current ratio is between the 10 yar low and median P/GP Ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.98. The Current P/B Ratio is 2.28 based on a stock price of $41.68, current Book Value of $2052M, and current Book Value per Share of $18.50. The current ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 11.70. The current P/CF Ratio is 10.50 based on a stock price of $41.68, Cash Flow per Share estimate for 2020 of $3.97 and Cash Flow of $445M. The current P/CF Ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical and 6 year median dividend yield of 1.41%. The current dividend yield is 1.49% based on dividends of $0.62 and a stock price of $41.68. The current dividend yield is 5.5% above the historical and 6 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 5 year median dividend yield of 1.45%. The current dividend yield is 1.49% based on dividends of $0.62 and a stock price of $41.68. The current dividend yield is 2.4% above the historical and 6 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. (I am using the 5 year median dividend yield to use what information I have.)
The 10 year median Price/Sales (Revenue) Ratio is 1.11. The current P/S Ratio is 1.26 based on Revenue estimate for 2020 of $3,702M, Revenue per Share of $33.02 and a stock price of $41.68. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield testing says that the stock price is below the median, but this is not confirmed by the P/S Ratio which says it is above the median. Most of the testing is showing the stock price as above or below the median, but still in the reasonable range. The exception is the P/E Ratio test. If you notice the P/E Ratios have been climbing higher over time.
Is it a good company at a reasonable price? I like this company. It is currently a dividend growth company having started dividend payments 6 years ago. The stock price seems reasonable, although it is at the top end of the reasonable range. With the low dividend yield it would be good stock to build a portfolio with.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (5) and Hold (2). The consensus would be a Buy. The 12 month stock price is $46.00. This implies a total return of 11.85%, with 10.36% from capital gains and 1.49% from dividends based on a current stock price of $41.68.
Analysts on Stock Chase seem to like this company. Aditya Raghunath on Motley Fool does not currently like this stock and thinks they might have a tough road ahead. A writer on Simply Wall Street talks about some positive aspects to this company. A writer on Simply Wall Street thinks this is a company worth watching.. The Blogger Dividend Earner looked at this stock in May of this year.
Stantec Inc is a global engineering and construction firm. Stantec has one reportable segment: consulting services. It utilizes one common brand and operates the same systems with generally the same policies, practices, and programs. Stantec derives the substantial majority of its sales from the United States and Canada, and the company works in both the public and private sectors. Its web site is here Stantec Inc.
The last stock I wrote about was about was FirstService Corp (TSX-FSV, NASDAQ-FSV) ... learn more. The next stock I will write about will be Methanex Corp (TSX-MX, NASDAQ-MEOH) ... learn more on Wednesday, December 16, 2020 around 5 pm. Tomorrow on my other blog I will write about Johnson and Johnson.... learn more on Tuesday, December 15, 2020 around 5 pm.
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.
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