November 3, 2013 Comments

Stantec is updated rated Weak Buy at CAN $65.69 and U.S. $62.81.

Stantec’s share price has risen a remarkable 65% in 2013. In part this is due to achieved earnings growth in 2013. But in part it is due to investors being willing to pay a higher multiple for its earnings. The P/E ratio started out 2013 at 14.7 and is now at 20.2.

Stantec is a great company and has a great future and will likely continue to grow earnings at a strong rate in the long term. However, it is now “pricing in” quite a bit of growth. It is not the bargain that it was before this big price increase.

It does not appear to be the best choice for an investment at the moment though it will likely due okay in the long term. I had recently sold all of the shares that I held in non-taxable accounts. I still hold some shares in a taxable account and am undecided whether to sell those. The stock is not rated Sell, but I could still decide to sell these shares to hold cash or invest in something more compelling.

While the Q3 earnings reported on Thursday morning were very strong, it is not entirely clear why the price jumped quite so much on Thursday and Friday. I did a search for analyst reports and did not see anything that seemed to explain the sharp rise.

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