Up 17% in the Last Month, Is Stantec Stock a Buy Today?

Stantec stock (TSX:STN) has been rising higher and higher from huge announcements, and more good news looks like it’s on the way for investors.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 5, 2023 8:15 pm EST

| More on: STN

Shares of Stantec (TSX:STN) stock have been climbing steadily the last month, up 17% in that time period. So today, let’s look over what’s been going on with Stantec stock. And furthermore, whether it’s still a buy on the TSX today.

Car, EV, electric vehicle — Image source: Getty Images

First, the earnings

The climb in share price first started as Stantec reported strong earnings for its third quarter. The design and engineering company also increased its future outlook for the year, adding to growth for the stock.

Net revenue came in at $1.3 billion for the quarter, up 13.5% over the year before. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also rose by 18.3%, with its backlog up 7.6% to $6.4 billion. It was a record third quarter, with strong demand continuing in the United States and Canada. This has led to massive hiring, and even more growth expected.

The company increased its 2023 range across the board. Net revenue rose from between 10% and 13% growth to between 12% and 14%. Adjusted EBITDA was up from 16.3% to 16.7% to between 16.7% and 17.1%. Adjusted net income rose from above 7.5% to above 8.2%, with adjusted diluted earnings per share (EPS) also seeing a huge increase. The company now expects growth of between 22% and 25%, almost double the 12% to 15% expected earlier.

Next, acquisitions

Stantec stock then went on to announce two acquisitions and a new factory after earnings. That’s all in just a month! The company announced it would be acquiring ZETCON in Germany, with a focus on infrastructure construction. While terms weren’t announced, this provides 13 offices across Germany, with a large construction market valued at EUR427 billion in 2022.

Then, as Canada continues to see growth in battery-charging stations for electric vehicles, Stantec stock announced a new facility out of British Columbia. This would create the E-One Moli Energy facility, building lithium-ion batteries in the province. It will become the largest factory in Canada for high performance lithium-ion batteries, with over 135 million battery cells each year.

Finally, Stantec stock announced a buyback program, issuing 3,108,450 common shares from its treasury. These were at a price of $92.50 per share, now lower than the price of $101.50 as of writing. This brought in proceeds of $287,531,625 for the company, and will be used to repay balances on credit, as well as more acquisitions.

More to come!

Yes, there are likely to be even more acquisitions for Stantec, and the company is quite positive about the future. This was recently announced during an Investor Day, where Stantec stock stated its strategic plan for 2024 to 2026.

So right now, Stantec stock may be just warming up. With shares up 17% in the last month, it may not look like a steal. Especially with shares up 53% in the last year. However, there is a reason for this growth. Stantec stock is taking advantage of growth opportunities, while still putting cash aside to pay down debt. It would take just 82% of its equity to pay off all debts.

So while it trades at just 1.8 times sales and 4.7 times book value, and with EV-to-EBITDA (enterprise value-to-earnings before interest, taxes, depreciation and amortization) at 16.7, it looks like a great deal on the TSX today.