Stantec Inc (NYSE:STN) Identified as a Quality Investment Candidate on Caviar Cruise Screen

Professional services firm Stantec Inc (NYSE:STN) has appeared as a notable candidate on the Caviar Cruise quality investing screen, a method created to find companies with solid financial traits appropriate for long-term holding. This structured process assesses firms using past revenue and profit increases, high returns on invested capital, acceptable debt amounts, and steady cash flow creation, attributes that usually point to lasting competitive strengths and operational skill.

Financial Performance and Growth Metrics

The Caviar Cruise method focuses on steady increases in both revenue and operational profitability. Stantec displays especially solid performance in operational earnings increases, with its EBIT (earnings before interest and taxes) showing a 5-year compound annual growth rate of 11.52%. This is above the screen's lowest limit of 5% and shows the company's capacity to grow its core operational profitability over time. The company's profit quality figure is notable at 175.41% over the 5-year average, greatly exceeding the 75% need. This shows Stantec turns accounting profits into real cash flow at a high rate, offering financial room for strategic projects.

• EBIT Growth (5Y CAGR): 11.52% (versus 5% minimum requirement)
• Profit Quality (5Y Average): 175.41% (versus 75% minimum requirement)
• Debt/FCF Ratio: 3.26 (within acceptable 0-5 range)

Return on Invested Capital and Financial Health

Return on invested capital acts as a central measure in quality investing, calculating how well a company creates returns from its capital investments. Stantec's ROIC excluding cash, goodwill, and intangibles reaches 31.47%, more than twice the screen's 15% limit. This high performance indicates the company uses capital with notable efficiency. The debt-to-free-cash-flow ratio of 3.26 years fits well within the screen's acceptable span of 0-5 years, showing Stantec could in theory pay back all outstanding debt in just over three years using current cash flow levels.

Fundamental Analysis Overview

According to Chartmill's fundamental analysis report, Stantec gets a 6 out of 10 overall, placing it as a steady performer in the construction and engineering field. The detailed analysis shows several main strengths:

• Profitability is a specific strength with a score of 7/10, pushed by better margins and returns that do better than most industry competitors
• Growth metrics show solid historical EPS growth of 17.12% each year and estimated future EPS growth of 15.68%
• Financial health gets a middle score of 5/10, with the debt-to-FCF ratio being a good part
• Valuation is still a point to think about with a score of 3/10, as the company trades at higher multiples compared to past and market levels

Positioning for Quality Investors

For investors using a quality-centered method, Stantec offers several appealing traits matching Caviar Cruise ideas. The company's high ROIC indicates lasting competitive strengths in its professional consulting services in engineering, architecture, and environmental sciences. Solid profit quality and acceptable debt amounts give financial stability, while steady EBIT growth shows operational skill. The company's global presence across Canada, the United States, and international markets gives diversification advantages and contact with infrastructure development patterns worldwide.

While valuation measures indicate the company trades at higher levels, quality investors often agree to higher multiples for businesses showing better financial traits and lasting competitive strengths. The company's place in necessary infrastructure services offers some downturn resistance, and its varied service offerings across many fields lower reliance on any single market.

Looking at More Opportunities

Investors curious about finding other companies that fit the Caviar Cruise quality standards can access the full screening results to do their own study and evaluation.

Disclaimer: This analysis is based on publicly available information and screening methods. It does not form investment advice or a suggestion to buy, sell, or hold any security. Investors should do their own study and talk with financial advisors before making investment choices.