U.S. markets open in 4 hours 15 minutes
  • S&P Futures

    3,893.00
    +25.50 (+0.66%)
     
  • Dow Futures

    31,588.00
    +230.00 (+0.73%)
     
  • Nasdaq Futures

    13,154.00
    +98.75 (+0.76%)
     
  • Russell 2000 Futures

    2,257.60
    +28.50 (+1.28%)
     
  • Crude Oil

    60.57
    +0.82 (+1.37%)
     
  • Gold

    1,725.30
    -8.30 (-0.48%)
     
  • Silver

    26.75
    -0.13 (-0.48%)
     
  • EUR/USD

    1.2099
    +0.0012 (+0.10%)
     
  • 10-Yr Bond

    1.4150
    0.0000 (0.00%)
     
  • Vix

    22.79
    -0.56 (-2.40%)
     
  • GBP/USD

    1.3983
    +0.0027 (+0.19%)
     
  • USD/JPY

    106.8960
    +0.1860 (+0.17%)
     
  • BTC-USD

    51,569.14
    +2,511.98 (+5.12%)
     
  • CMC Crypto 200

    1,031.10
    +43.00 (+4.35%)
     
  • FTSE 100

    6,693.22
    +79.47 (+1.20%)
     
  • Nikkei 225

    29,559.10
    +150.93 (+0.51%)
     

At CA$41.66, Is Stantec Inc. (TSE:STN) Worth Looking At Closely?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Stantec Inc. (TSE:STN), might not be a large cap stock, but it saw a decent share price growth in the teens level on the TSX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Stantec’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Stantec

Is Stantec still cheap?

Stantec is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Stantec’s ratio of 24.88x is above its peer average of 18.21x, which suggests the stock is trading at a higher price compared to the Professional Services industry. Another thing to keep in mind is that Stantec’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from Stantec?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Stantec's earnings over the next few years are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? STN’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe STN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on STN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for STN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in Stantec, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.