Stock Review - Stantec - Symbol STN on the TSX and NYSE

Stantec is a relatively small engineering company based in Alberta, Canada. They conduct work primarily in North America. The market capitalization is currently around $2 billion CDN. This is relatively small compared to the giants SNC, Fluor and Jacobs Engineering (and others). They have grown significantly over the past 15 years due to aquisitions of smaller type firms and also some organic growth.

I have been following this stock since about 2003 and buying/selling the shares. Originally I had bought the shares around 2004 and sold them in 2007 for a nice profit. I just did a quick check on the stock performance since 2000 on Google Finance and I get almost a 1500% return over that period (2000 to present). This vastly outperforms the TSX over the same period. The reason is simple - consistent earnings growth, strong margins, decent competetive position and capable management.

In my opinion this is a well managed company that at the right price could be an excellent investment over the long term. The stock currently trades around $44 CDN on the TSX. I do not currently own STN having sold out in the high 30's. I am currently worried about valuation here. The stock has advanced signficantly over the last 12 months or so. I have a feeling that some money has come over from SNC Lavalin (ie. disappointed shareholders). In other words, with all the headline controversy at SNC some investment money will flow into Stantec. In my opinion at $44 and a trailing P/E of about 17 the stock is currently overvalued (slightly). I would like to see a pull-back into the mid 30's if possible. Let's wait and see. STN does provide a small dividend. The dividend yield is 1.5%.

On a cautionary note this stock is cyclical and therefore paying attention to business cycle indicators might be helpful.