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If you are wondering whether Stantec's current share price really reflects its underlying value, this article will help you connect the recent moves in the stock to what the fundamentals may be saying.
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Stantec's share price closed at C$102.11, with the stock down 2.3% over the past week, 17.6% over the past month, 22.7% year to date, and 28.9% over the past year, although the 3 year and 5 year returns stand at 26.0% and 100.0% respectively.
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These recent declines come after a period in which the stock had previously produced stronger multi year returns. That experience can change how investors think about both its risk and its potential. While short term price moves often reflect shifting sentiment, they also prompt a closer look at how the current valuation compares to the company's fundamentals and longer term track record.
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On Simply Wall St's valuation checks, Stantec scores a perfect 6 out of 6 on measures of being potentially undervalued. Next is a closer look at what different valuation approaches say about the stock today, followed by a final section that sets out an even more comprehensive way to think about value.
Find out why Stantec's -28.9% return over the last year is lagging behind its peers.
Approach 1: Stantec Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a stock could be worth by projecting the cash the business may generate in future, then discounting those cash flows back to today's value.
For Stantec, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is CA$659.3 million. Analyst and extrapolated projections, expressed in CA$, range from CA$647.9 million in 2026 to CA$1,214.8 million in 2035. For example, 2028 is projected at CA$854.1 million. Simply Wall St uses analyst estimates where available and then extends the series further out using its own assumptions.
After discounting these projected cash flows, the model arrives at an estimated intrinsic value of CA$140.07 per share. Compared with the recent share price of CA$102.11, this implies the stock trades at about a 27.1% discount and screens as potentially undervalued on this DCF view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Stantec is undervalued by 27.1%. Track this in your watchlist or portfolio , or discover 8 more high quality undervalued stocks .
Approach 2: Stantec Price vs Earnings
For profitable companies, the P/E ratio is a useful way to relate what you pay for the stock to the earnings it currently generates. It gives a quick sense of how many years of current earnings the market is effectively pricing in.
The level at which a P/E ratio looks normal or fair usually reflects expectations for future earnings growth and the risks around those earnings. Higher expected growth and lower perceived risk can justify a higher P/E, while slower growth or higher uncertainty tend to be associated with a lower P/E.
Stantec currently trades on a P/E of 23.77x. This sits above the Construction industry average P/E of 14.19x, but below the broader peer average of 34.68x. Simply Wall St also calculates a proprietary "Fair Ratio" for Stantec of 33.69x, which reflects factors such as its earnings growth profile, industry, profit margins, market cap and specific risk characteristics.
Compared with simple industry or peer comparisons, the Fair Ratio aims to be more tailored because it looks at the company's own growth, risks and profitability alongside its sector and size. On this basis, Stantec's actual P/E of 23.77x sits below the Fair Ratio of 33.69x, which indicates that the stock screens as potentially undervalued on this multiple.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Stantec Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St's Community page let you attach a clear story about Stantec to your numbers by linking your view of its future revenue, earnings and margins to a forecast and fair value, then comparing that fair value to today's price to help you decide if the stock looks attractive or expensive. The Narratives automatically update as new news or earnings arrive. One investor might build a bullish Stantec Narrative around factors like record C$9.0b backlog, higher projected profit margins of 11.32% and a fair value closer to the highest analyst target of C$171.0. Another investor might focus on risks like acquisition integration, labor constraints and reliance on government funding and therefore prefer assumptions and a fair value nearer the lowest analyst target of C$130.0.
Do you think there's more to the story for Stantec? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include STN.TO .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
