Stantec's Remarkable Growth: A Deep Dive into Valuation and Future Prospects
Stantec's shares have shown remarkable growth, with their value increasing fivefold over the last five years. This significant rise has led investors to assign higher valuations to the company, reflecting its exceptional business performance.
The company's sustained momentum stems from several key factors. Firstly, robust organic growth, complemented by strategic mergers and acquisitions (M&A), has significantly expanded its market presence. Secondly, a healthy project backlog ensures strong earnings visibility. These elements collectively support Stantec's ability to maintain mid-teen EBITDA margins, signaling continued financial stability and growth potential. Recent acquisitions, such as Page and Cosgroves, further underscore Stantec's commitment to reinforcing its growth trajectory.
Despite Stantec's clear appeal as a long-term value compounder, the current earnings multiples, ranging from 27 to 30 times, indicate a stretched valuation. While the company's past performance and future prospects are strong, these elevated multiples suggest that the stock may not offer an attractive entry point for new investments at this time. Investors should exercise caution and consider a more favorable valuation before committing capital.
