Is it a good company at a reasonable price? I think that this is a good company. It certainly has done well for its shareholders over the long term. However, the price seems to be currently expensive.
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. I 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. I sold because I decided to go for Dividend Growth stocks almost wholly. This stock was not paying dividends at that time.
When I was updating my spreadsheet, I noticed from the chart below that Stock price has been growing strongly over the past 5 and 10 years.
| Year | Item | Growth |
|---|---|---|
| 5 | Revenue Growth | 17.36% |
| 5 | EPS Growth | 47.54% |
| 5 | Net Income Growth | 53.74% |
| 5 | Cash Flow Growth | 38.96% |
| 5 | Dividend Growth | 46.89% |
| 5 | Stock Price Growth | 109.52% |
| 10 | Revenue Growth | 163.76% |
| 10 | EPS Growth | 1185.71% |
| 10 | Net Income Growth | 1485.06% |
| 10 | Cash Flow Growth | 246.46% |
| 9 | Dividend Growth | 116.67% |
| 10 | Stock Price Growth | 415.56% |
If you had invested in this company in December 2011, for $1,006.31 you would have bought 73 shares at $13.79 per share. In December 2021, after 10 years you would have received $341.46 in dividends. The stock would be worth $5,188.11. Your total return would have been $5,529.57.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $13.79 | $1,006.31 | 73 | 10 | $341.46 | $5,188.11 | $5,529.57 |
The dividend yields are low with dividend growth low, but close to moderate. The current dividend yield is low (below 2%) at 1.08%. The 5, 10 and historical dividend yields are also low at 1.59%, 1.41% and 1.41%. The dividend growth is low (under 8%) at 7.99% per year over the past 5 years. The last increase was in the moderate range (8% to 14% ranges) at 9.09% and it was done in 2022.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 36% with 5 year coverage at 45%. I also have DPRs for Adjusted Earnings per Share (AEPS). The DPR for AEPS for 2021 is 27% with 5 year coverage at 28%. The DPR for Cash Flow per Share (CFPS) for 2021 is 14% with 5 year coverage at 4%. The DPR for Free Cash Flow (FCF) for 2021 is probably 21% with 5 year coverage at 20% (as there is disagreement on what the FCF is).
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is 0.15 (although debt went up by 88% this year). This is low and good. The Liquidity Ratio for 2021 is fine at 1.41 and especially when you add in cash flow after dividends, it is good at 1.69. The Debt Ratio for 2021 is good at 1.62. The Leverage and Debt/Equity Ratios are fine at 2.61 and 1.61.
The Total Return per year is shown below for years of 5 to 27 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 7.99% | 17.19% | 15.94% | 1.25% |
| 2011 | 10 | 8.97% | 19.44% | 17.82% | 1.62% |
| 2006 | 15 | 13.12% | 12.32% | 0.79% | |
| 2001 | 20 | 17.47% | 16.73% | 0.74% | |
| 1996 | 25 | 20.34% | 19.66% | 0.68% | |
| 1994 | 27 | 14.33% | 13.84% | 0.48% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 22.79, 31.51, 40.23. The corresponding 10 year ratios are 19.09, 22.46 and 25.87. The corresponding historical ratios are 15.52, 16.56 and 22.88. The current P/E Ratio is 31.59 based on a stock price of $66.65 and EPS estimate for 2022 of $2.11. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 16.18, 18.16 and 20.14. The corresponding 10 year ratios are 14.99, 17.91 and 20.53. The current P/AEPS Ratio is 22.14 based on a stock price of $66.65 and AEPS estimate for 2022 of $3.01. The current ratio is above the high ratios of 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $30.68. The 10-year low, median, and high median Price/Graham Price Ratios are 1.28, 1.49 and 1.79. The current ratio is 2.17 based on a stock price of $66.65. This ratio is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 2.15. The current P/B Ratio is 3.36 based on a Book Value of $2,196M, Book Value per Share of $19.83 and a stock price of $66.65. The current ratio is 56% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 12.93. The current P/CF Ratio is 19.55 based on a Cash Flow per Share estimate for 2022 of $3.61, Cash Flow of $378M and a stock price of $66.65. The current P/CF Ratio is 51% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.41%. The current dividend yield is 1.08% based on a stock price of $66.65 and dividends of $0.72. The current dividend yield is 23% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 9 median dividend yield also of 1.41%. The current dividend yield is 1.08% based on a stock price of $66.65 and dividends of $0.72. The current dividend yield is 23% above the 9 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. (Dividends have only been paid for 9 years.)
The 10-year median Price/Sales (Revenue) Ratio is 1.16. The current P/S Ratio is 1.66 based on a stock price of $66.65, Revenue estimate for 2022 of $4,434M, and Revenue per Share of $40.04. The current ratio is 43% above the 10 year median ratio.
Results of stock price testing is that the stock price is probably expensive. The dividend yield tests show this. It is confirmed by the P/S Ratio test. All the other tests were good tests and they all said that the stock price is expensive.
I look at the total return over several years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the beginning P/E Ratios for good returns are mostly lower than today. For the P/S Ratio the past ratios are lower than today.
In the following chart the capital gains for the 15 years to December 31, 2021 is 13.12% per year. The beginning yield P/E Ratio and the P/S Ratio were at 18.99 and 1.59. Does this chart change my opinion of the stock price? No.
| Year | Total Ret | Gap. Gain | Start P/E | Start P/S | Yield |
|---|---|---|---|---|---|
| 5 | 17.19% | 15.94% | 27.80 | 1.25 | 1.30% |
| 10 | 19.44% | 17.82% | 98.46 | 0.91 | |
| 15 | 13.12% | 12.32% | 18.99 | 1.59 | |
| 20 | 17.47% | 16.73% | 14.47 | 0.73 | |
| 25 | 20.34% | 19.66% | 8.77 | 0.48 | |
| current | 31.59 | 1.66 | 1.06% |
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $76.91. This implies a total return of 16.47% with 1.08% from dividends and 15.39% from capital gains.
Analysts like this stock on Stock Chase, but one analyst thinks it is overpriced. Ambrose O'Callaghan on Motley Fool in August thought this was a good stock to buy and hold for the next 3 years. Adam Othman on Motley Fool thinks this stock has exceptional fundamentals for long-term growth. The company put out a Press Release on their results for the year end of 2021. The company put out a Press Release on their third quarter of 2022 results.
This stock is reviewed by Simply Wall Street on Yahoo Finance. Simply Wall Street put out one warning sign for this stock of debt is not well covered by operating cash flow.
Stantec Inc is a sustainable engineering, architecture, and environmental consulting company. The company is geographically diversified in three regional operating units namely Canada, the United States and Global, offering similar services across all regions. Its web site is here Stantec Inc.
The last stock I wrote about was about was Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more. The next stock I will write about will be Methanex Corp (TSX-MX, NASDAQ-MEOH) ... learn more on Wednesday, December 7, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks December 2022 .... learn more on Tuesday, December 6, 2022 around 5 pm.
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