Assessing Stantec Inc’s (TSX:STN) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess STN’s latest performance announced on 31 December 2017 and evaluate these figures to its historical trend and industry movements. View our latest analysis for Stantec
How Well Did STN Perform?
I prefer to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to analyze various companies on a more comparable basis, using the latest information. For Stantec, its latest trailing-twelve-month earnings is CA$97.00M, which, in comparison to the prior year’s level, has fallen by -25.67%. Since these figures are somewhat nearsighted, I have estimated an annualized five-year figure for STN’s earnings, which stands at CA$116.44M This doesn’t look much better, since earnings seem to have steadily been declining over time.
Why could this be happening? Well, let’s look at what’s going on with margins and if the rest of the industry is experiencing the hit as well. Revenue growth over the past few years, has been positive, however, earnings growth has failed to keep up meaning Stantec has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the Canadian professional services industry has been growing its average earnings by double-digit 24.07% over the past twelve months, and 12.96% over the past five. This means whatever uplift the industry is profiting from, Stantec has not been able to leverage it as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face an extended period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. You should continue to research Stantec to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for STN’s future growth? Take a look at our free research report of analyst consensus for STN’s outlook.
- 2. Financial Health: Is STN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.