BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 08/15/2017 TARGET PRICE $33.32 BUSINESS DESCRIPTION Stantec Inc. provides professional consulting services in the area of infrastructure and facilities for clients in the public and private sectors in Canada, the United States, and internationally. Sector: Industrials Sub-Industry: Research & Consulting Services Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $33.32 34 32 30 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 3.35 9.05-3.49 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 14.68 33.32 21.09 Net Income 361.16-6.82-9.45 EPS 325.00-21.38-15.30 RETURN ON EQUITY (%) Ind Avg S&P 500 Q2 2017 6.19 15.68 13.41 Q2 2016 6.82 16.25 11.79 Q2 2015 14.01 15.40 12.91 P/E COMPARISON Rating History BUY HOLD BUY HOLD BUY Volume in Thousands 2015 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 28 26 24 22 20 400 200 0 26.89 31.79 Ind Avg EPS ALYSIS¹ ($) Q1 0.40 Q2 0.46 Q3 0.53 Q4 0.26 Q1 0.32 Q2 0.20 Q3 0.43 Q4 0.26 24.86 S&P 500 Q1-0.51 Q2 0.85 RECOMMENDATION We rate () a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. HIGHLIGHTS The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Professional Services industry. The net income increased by 361.2% when compared to the same quarter one year prior, rising from $21.17 million to $97.63 million. Despite its growing revenue, the company underperformed as compared with the industry average of 22.2%. Since the same quarter one year prior, revenues rose by 14.7%. Growth in the company's revenue appears to have helped boost the earnings per share. The gross profit margin for is rather high; currently it is at 53.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.95% is above that of the industry average. 2015 2016 = not available NM = not meaningful 2017 1 Compustat fiscal year convention is used for all fundamental data items. Net operating cash flow has significantly increased by 234.12% to $103.44 million when compared to the same quarter last year. In addition, has also vastly surpassed the industry average cash flow growth rate of 12.21%. PAGE 1
PEER GROUP ALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -5% 35% UNFAVORABLE ICFI HURN FCN 10% ABCO EBITDA Margin (TTM) EXPO DNB EFX NLSN FAVORABLE TRU VRSK 50% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $863 Million and $15 Billion. Companies with or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -5% 35% UNFAVORABLE HURN -17.5% Earnings Yield (TTM) FAVORABLE TRU EXPO EFX VRSK NLSN DNB ICFI FCN ABCO Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.6% and 33.3%. Companies with or NM values do not appear. 5% INDUSTRY ALYSIS The professional services industry is comprised of companies engaged in widely varied activities such as credit ratings, research, consulting, temporary employment, professional employment placement, executive recruiting, and human resource management companies. Some of the largest companies include Nielsen Holdings (NLSN), Verisk Analytics (VRSK), EquiFax (EFX), Robert Half Intl (RHI), Manpower Group (MAN), and Acacia Research (ACTG). The job market has started to resemble the online dating world where potential employers are willing to pay an intermediary to carefully screening applicants to find ones that exactly match the skill set required to excel at the particular job. Employers are researching the credit histories of potential employees and dating a string of temporary employees before making a long-term employment commitment. Temporary employment agencies are giving the otherwise unemployed a chance to prove themselves to an employer while limiting the risk to that employer associated with adding another full time employee. In this economic recovery, the U.S. is not yet at full employment. However, the unemployment rate has fallen dramatically. In the near term this constrains the current business climate for employment agencies. PEER GROUP: Professional Services Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 27.70 3,156 26.89 3,457.67 118.39 TRU TRANSUNION 54.31 9,905 41.78 1,863.60 245.60 HURN HURON CONSULTING GROUP INC 39.00 863 NM 797.71-136.35 DNB DUN & BRADSTREET CORP 117.87 4,356 22.24 1,732.60 192.70 ABCO ADVISORY BOARD CO 53.77 2,192 20.29 799.15 107.81 EXPO EXPONENT INC 73.60 1,900 35.90 336.53 55.40 FCN FTI CONSULTING INC 4 1,579 33.83 1,781.94 48.18 VRSK VERISK ALYTICS INC 90.82 14,957 33.51 2,081.02 459.75 EFX EQUIFAX INC 109.58 13,158 24.79 3,324.90 538.00 NLSN NIELSEN HOLDINGS PLC 35.67 12,705 25.12 6,467.00 507.00 ICFI ICF INTERTIOL INC 54.60 1,018 21.67 1,197.55 48.48 The peer group comparison is based on Major Research & Consulting Services companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Stantec Inc. provides professional consulting services in the area of infrastructure and facilities for clients in the public and private sectors in Canada, the United States, and internationally. It operates through four segments: Consulting Services - Canada, Consulting Services - United States, Consulting Services - Global, and Construction Services. The company provides consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental services, project management, and project economics; and construction management services. It undertakes commercial, healthcare, education, industrial, airports and aviation, civic, science and technology, waterpower and dam, power, oil and gas, mining, water, building, power transportation, community development, and transportation projects. The company was formerly known as Stanley Technology Group Inc. and changed its name to Stantec Inc. in October 1998. Stantec Inc. was founded in 1954 and is headquartered in Edmonton, Canada. 10160-112 Street, Suite 200 Edmonton, AB T5K2L6 CAN Phone: 780-917-7000 Fax: 780-917-7330 http://www.stantec.com Employees: 22000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 2.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 40% of the companies we cover. Efficiency 3.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 60% of the companies we review. Price volatility 3.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor. Solvency 3.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 50% of the companies we analyze. Income 3.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 60% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINCIAL ALYSIS 's gross profit margin for the second quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. has liquidity. Currently, the Quick Ratio is 0.93 which shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 2.76% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. INCOME STATEMENT Net Sales ($mil) 891.49 777.33 EBITDA ($mil) 102.13 86.06 EBIT ($mil) 69.31 53.11 Net Income ($mil) 97.63 21.17 STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 206.97 169.26 Total Assets ($mil) 3,920.03 4,095.82 Total Debt ($mil) 801.73 1,106.38 Equity ($mil) 1,911.83 1,860.31 PROFITABILITY Gross Profit Margin 53.76% 53.63% EBITDA Margin 11.45% 11.07% Operating Margin 7.77% 6.83% Sales Turnover 0.88 0.63 Return on Assets 3.02% 3.10% Return on Equity 6.19% 6.82% DEBT Current Ratio 1.42 1.60 Debt/Capital 0.30 0.37 Interest Expense 6.20 6.92 Interest Coverage 11.17 7.68 SHARE DATA Shares outstanding (mil) 114 114 Div / share 0.10 0.09 EPS 0.85 0.20 Book value / share 16.80 16.33 Institutional Own % Avg Daily Volume 21,342 19,690 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 8/15/2017. As of 11/16/2017, the stock was trading at a price of which is 4.2% below its 52-week high of $28.90 and 24.5% above its 52-week low of $22.25. 2 Year Chart BUY: $24.95 2016 HOLD: $22.52 BUY: $26.30 HOLD: $25.80 BUY: $26.55 $30 $28 $25 $23 MOST RECENT RATINGS CHANGES Date Price Action From To 8/15/17 $26.55 Upgrade Hold Buy 3/10/17 $25.80 Downgrade Buy Hold 11/28/16 $26.30 Upgrade Hold Buy 8/9/16 $22.52 Downgrade Buy Hold 11/16/15 $24.95 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/16/2017) 43.95% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.76% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.29% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. The current P/E ratio indicates a discount compared to an average of 31.79 for the Professional Services industry and a premium compared to the S&P 500 average of 24.86. For additional comparison, its price-to-book ratio of 1.65 indicates a significant discount versus the S&P 500 average of 3.16 and a significant discount versus the industry average of 8.97. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 26.89 Peers 31.79 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a discount to its peers. Price/Projected Earnings Peers 21.53 Neutral. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth potential. Ratio not available. Price/Book 1.65 Peers 8.97 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 0.91 Peers 3.93 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 9.26 Peers 17.97 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth Peers 0.93 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. Ratio not available. Earnings Growth lower higher -21.38 Peers 47.64 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 33.32 Peers 11.06 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5