Is it a good company at a reasonable price? I do like this company. It has done well for shareholders in the past and expect shareholders in the future will also do well. However, to me, this stock seems currently to be expensive and it may not be the time to buy. There are obviously others that disagree with my assessment.
I do not own this stock of Stantec Inc (TSX-STN, NYSE-STN), but I used to. 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. I did not profit from this but sold in 2011 because it was non-core stock with no dividends and I was reassessing what stocks I wanted to continue to hold. I paid too much for this stock in 2008.
When I was updating my spreadsheet, I noticed that this company had a good year in 2022 with Revenue up by 23%, Adjusted Earnings per Share (AEPS) up by 29% and Earnings per Share (EPS) up by 23%. They are doing well also in 2023 with Revenue up in the last 12 months by 11% and Adjusted Earnings per Share (AEPS) up by 18% and Earnings per Share (EPS) up by 34%.
If you had invested in this company in December 2012, for $1,013.63 you would have bought 51 shares at $19.88 per share. In December 2022, after 10 years you would have received $259.21 in dividends. The stock would be worth $3,308.88. Your total return would have been $3,568.09. This is a total return would be a total return of 14.03% per year with 12.56% from capital gain and 1.47% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $19.88 | $1,013.63 | 51 | 10 | $259.21 | $3,308.88 | $3,568.09 |
The current dividend yield is low with dividend growth low. The dividend yield is low (below 2%) at 0.77%. The 5, 10 and historical dividend yields are also low at 1.59%, 1.31% and 1.37%. The dividend growth is low (below 8%) at 7.7% per year for the last 5 years. The last increase was moderate (8% to 15% ranges) at 8.3% and was done in 2023.
The Dividend Payout Ratios (DPR) are good. The DPR for 2022 for Earnings per Share (EPS) is 32% with 5 year coverage at 40%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 23% with 5 year coverage at 27%. The DPR for 2022 for Cash Flow per Share (CFPS) is 14% with 5 year coverage at 5%. The DPR for 2022 for Free Cash Flow (FCF) is 26% with 5 year coverage at 21%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 31.76% | 39.72% |
| AEPS | 22.52% | 26.81% |
| CFPS | 14.00% | 4.68% |
| FCF | 26.15% | 20.91% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.16. The Liquidity Ratio for 2022 is a bit low at 1.37 and 1.39 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.53 and 1.76. The Debt Ratio for 2022 is fine at 1.68 and 1.68 currently. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.47 and 1.47.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.16 | 0.12 |
| Intang/GW | 0.37 | 0.25 |
| Liquidity | 1.37 | 1.39 |
| Liq. + CF | 1.53 | 1.76 |
| Debt Ratio | 1.68 | 1.68 |
| Leverage | 2.47 | 2.47 |
| D/E Ratio | 1.47 | 1.47 |
The Total Return per year is shown below for years of 5 to 28 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 7.66% | 14.38% | 13.02% | 1.36% |
| 2012 | 10 | 8.92% | 14.03% | 12.56% | 1.47% |
| 2007 | 15 | 9.21% | 8.36% | 0.85% | |
| 2002 | 20 | 15.76% | 14.86% | 0.90% | |
| 1997 | 25 | 17.35% | 16.56% | 0.79% | |
| 1994 | 28 | 11.90% | 11.34% | 0.56% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 22.79, 27.74 and 31.38. The corresponding 10 year ratios are 21.65, 25.53 and 29.24. The corresponding historical ratios are 15.98, 16.62 and 22.95. The current P/E Ratio is 32.17 based on a stock price of $101.33 and EPS estimate for 2023 of $3.15. 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/Earnings per Share Ratios are 16.18, 18.16 and 20.14. The corresponding 10 year ratios are 16.01, 18.17 and 21.07. The current P/AEPS Ratio is 27.24 based on AEPS estimate for 2023 and a stock price of $101.33. 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 get a Graham Price of $43.11. The 10-year low, median, and high median Price/Graham Price Ratios are 1.14, 1.33 and 1.54. The current P/GP Ratio is 2.35 based on a stock price of $101.33. The current ratio is above the high ratio of the 10 year median ratio. 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 2.28. The current P/B Ratio is 4.56 based on a Book Value of $2,463M, Book Value per Share of $22.20 and a stock price of $101.33. The current ratio is 100% 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 13.76. The current P/CF Ratio is 16.37 based on a stock price of $101.33, Cash Flow per Share estimate for 2023 of $6.19 and Cash Flow of 686.8M. The current ratio is 19% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. I do wonder about this estimate as it is a 125% increase.
The 12 month Cash Flow is $490.4M, which implies a Cash Flow per Share of $4.42 and a P/CF Ratio of 22.93. This ratio is 67% 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 1.37%. The current dividend yield is 0.77% based on a stock price of $101.33 and dividends of $0.78. The current dividend yield is 44% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.31%. The current dividend yield is 0.77% based on a stock price of $101.33 and dividends of $0.78. The current dividend yield is 65% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 124. The current P/S Ratio is 2.23 based on Revenue estimate for 2023 of $5,050M, Revenue per Share of $45.51 and a stock price of $101.33. The current ratio is 79% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is relatively expensive. The dividend yield tests say this and it is confirmed by the P/S Ratio test. All the tests show the same thing except for the P/CF Ratio and I am wondering how good that test is.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (7) and Hold (2). The consensus is a Strong Buy. The 12 month stock price consensus if $107.45 with a high of $115.00 and a low of $97.00. The consensus price of $107.45 implies a total return of 6.81% with 6.04% from capital gains and 0.77% from dividends. To me, the Strong Buy recommendation, and a total return of 6.81% does not make any sense.
Analysts give cautious buys at Stock Chase. Stock Chase gives this stock 4 stars out of 5. It is on the 3 dividend lists that I follow. Aditya Raghunath on Motley Fool thinks that this stock is not too expensive given its growth estimates. Karen Thomas on Motley Fool thinks this is a stock to buy and hold. The company put out a Press Release on their 2022 year end results. The company put out a Press Release on their third quarter of 2023 results.
Simply Wall Street via Yahoo Finance says the fair value of this stock is $106.84 CDN$. Simply Wall Street has 3 warnings for this stock of significant insider selling over the past 3 months; shareholders have been diluted in the past year; and has a high level of debt. Simply Wall Street gives this stock 2 and one half stars out of 5.
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 Monday, December 4, 2023 around 5 pm.
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