STANTEC INC (NYSE:STN) – A Quality Stock Worth Considering

STANTEC INC (NYSE:STN) was identified through our Caviar Cruise screen, which focuses on high-quality companies with strong financials and sustainable growth. STN operates in engineering, architecture, and environmental consulting, serving clients across public and private sectors globally. The company meets several key criteria for quality investors, making it a candidate for further research.

Key Strengths

• High Return on Invested Capital (ROIC) – STN’s ROIC (excluding cash and goodwill) stands at 33.8%, well above the 15% threshold for quality companies. This indicates efficient use of capital to generate profits.
• Strong Profit Quality – The company’s five-year average profit quality is 175.4%, meaning it converts net income into free cash flow at an exceptional rate.
• Controlled Debt Levels – With a Debt-to-Free Cash Flow ratio of 4.05, STN could repay its debt in just over four years using current cash flows, signaling manageable leverage.
• EBIT Growth Outpacing Revenue – STN’s five-year EBIT growth (11.5%) exceeds revenue growth, suggesting improving operational efficiency and pricing power.

Fundamental Analysis Summary

STN scores 6 out of 10 in our fundamental rating, with strengths in profitability and growth. The company has consistently delivered positive earnings and cash flow, with improving margins. While its valuation appears somewhat expensive, its strong growth prospects (14.5% expected annual EPS growth) may justify the premium.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.