Is it a good company at a reasonable price? First, I would not buy a dividend stock with a dividend below 1%. It just takes too long to get to a good dividend yield on the original stock price. This stock, in the past, has had dividends over 1%. I know analysts have given it a buy rating, but analyst recommendations almost always are buys. Paying too much for a stock can adversely affect your long term returns. All my testing is showing that the stock price is relatively expensive. I think it is a good company, but it is currently relatively expensive.
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 both the CEO and Chairman have bought more stock over the past year. They have a new CFO who has bought shares over the past year since becoming CFO.
This company has had fairly good growth over the past 5 and 10 years. Analysts seem to expect this to continue this year. In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2024 and expected growth over this year.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 51.00% | 8.59% | 41.12% | <-12 mths |
| 5 | AEPS Growth | 101.65% | 15.06% | 12.26% | <-12 mths |
| 5 | Net Income Growth | 598.73% | 47.52% | 2.02% | <-12 mths |
| 5 | Cash Flow Growth | 215.59% | 25.84% | 2.79% | <-12 mths |
| 5 | Dividend Growth | 45.71% | 7.82% | 7.84% | <-12 mths |
| 5 | Stock Price Growth | 255.67% | 28.89% | 12.86% | <-12 mths |
| 10 | Revenue Growth | 176.48% | 10.70% | 14.78% | <-this year |
| 10 | AEPS Growth | 133.76% | 8.86% | 17.44% | <-this year |
| 10 | Net Income Growth | 126.54% | 8.52% | 13.92% | <-this year |
| 10 | Cash Flow Growth | 100.16% | 7.19% | 27.32% | <-this year |
| 10 | Dividend Growth | 137.21% | 9.02% | 9.15% | <-this year |
| 10 | Stock Price Growth | 223.05% | 12.44% | 12.86% | <-this year |
If you had invested in this company in December 2013, for $1,020.83 you would have bought 31 shares at $32.95 per share. In December 2023, after 10 years you would have received $171.28 in dividends. The stock would be worth $3,297.78. Your total return would have been $3,469.06. This would be a total return of 14.41% per year with 12.44% from capital gain and 0.97% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $32.93 | $1,020.83 | 31 | 10 | $171.28 | $3,297.78 | $3,469.06 |
The current dividend yield is low with dividend growth moderate. The current dividend yield is low (below 2%) at 0.70%. The 5, 10 and historical median dividend yields are also low at 1.15%, 1.31% and 1.31%. The dividend growth has been moderate (below 8% per year) over the past 5 years at 7.8%. The last dividends increase 2024 and it was for 7.7%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 26% with 5 year coverage at 32%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 21% with 5 year coverage at 25%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 13% with 5 year coverage at 7%. The DPR for 2023 for Free Cash Flow (FCF) is good at 15% with 5 year coverage at 15%. The sites I looked at all disagree on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 25.67% | 32.16% |
| AEPS | 20.84% | 25.21% |
| CFPS | 13.39% | 6.87% |
| FCF | 15.44% | 14.93% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.08 and currently at 0.11. The Liquidity Ratio for 2023 is low at 1.41 and 1.42 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.69 and currently at 1.74. The Debt Ratio for 2023 is good at 1.83 and 1.65 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.20 and 1.20 and currently at 2.54 and 1.54.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.08 | 0.11 |
| Intang/GW | 0.22 | 0.22 |
| Liquidity | 1.41 | 1.42 |
| Liq. + CF | 1.69 | 1.74 |
| Debt Ratio | 1.83 | 1.65 |
| Leverage | 2.20 | 2.54 |
| D/E Ratio | 1.20 | 1.54 |
The Total Return per year is shown below for years of 5 to 29 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 7.82% | 30.26% | 28.89% | 1.37% |
| 2013 | 10 | 9.02% | 13.41% | 12.44% | 0.97% |
| 2008 | 15 | 8.88% | 14.78% | 13.91% | 0.87% |
| 2003 | 20 | 16.66% | 15.94% | 0.73% | |
| 1998 | 25 | 20.05% | 19.34% | 0.71% | |
| 1994 | 29 | 12.40% | 11.99% | 0.42% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 21.82, 27.74 and 31.38. The corresponding 10 year ratios are 22.30, 27.07 and 30.53. The corresponding historical ratios are 16.07, 16.68 and 25.29. The current P/E Rati is 37.78 based on a stock price of $121.38 and EPS estimate for 2024 of $3.13. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.95, 19.67 and 22.26. The corresponding 10 year ratios are 16.57, 18.85 and 21.07. The current P/AEPS Ratio is 28.16 based on a stock price of $121.38 and AEPS estimate for 2024 of $4.31. 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 $48.21. The 10-year low, median, and high median Price/Graham Price Ratios are 1.18, 1.33 and 1.54. The current ratio is 2.52 based on a stock price of $121.38. The current ratio is above the high ratio for 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 2.28. The current ratio is 5.07 based on a stock price of $121.38, Book Value of $2,733M and Book Value per Share of $23.96. The current ratio is 122% 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 14.94. The current P/CF 19.96 based on Cash Flow per Share estimate for 2024 of $6.08, Cash Flow of $693.5M and a stock price of $121.38. The current ratio is 34% 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 1.31%. The current dividend yield is 0.69% based on dividends of $0.84 and a stock price of $121.38. The current dividend yield is 47% 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 0.69% based on dividends of $0.84 and a stock price of $121.38. The current dividend yield is 47% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 1.24. The current P/S Ratio is 2.38 based on Revenue estimate for 2024 of $5,815M, Revenue per Share of $50.98 and a stock price of $121.38. The current ratio is 92% 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 that the stock price is expensive. This is confirmed by the P/S Ratio test. All the tests say that the stock price is relatively expensive.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6) and Hold (2). The consensus is a Buy. The 12 month stock price of $131.54 with a high of $145.00 and low of $120.00. The consensus stock price implies a total return of 9.06% with 8.37% from capital gains and 0.69% from dividends.
Analysts on Stock Chase mainly think that this stock is a buy. However, one analyst prefers WSP and one thinks the price is too high. Stock Chase gives this stock 4 stars out of 5. Amy Legate-Wolfe on Motley Fool thinks this is a good infrastructure stock to buy. Brian Paradza on Motley Fool thinks this growth stock will power up investors’ portfolios. . . .
Stantec Inc is a sustainable engineering, architecture, and environmental consulting company. The company is geographically diversified in three regional operating units namely Canada, 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 2, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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