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Will Stantec Inc.'s (TSE:STN) Earnings Grow In The Year Ahead?

Simply Wall St

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In December 2018, Stantec Inc. (TSE:STN) released its earnings update. Generally, it seems that analyst forecasts are fairly optimistic, as a 26% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -6.8%. Presently, with latest-twelve-month earnings at CA$171m, we should see this growing to CA$216m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Stantec

How will Stantec perform in the near future?

Over the next three years, it seems the consensus view of the 11 analysts covering STN is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of STN's earnings growth over these next few years.

TSX:STN Past and Future Earnings, April 30th 2019

This results in an annual growth rate of 17% based on the most recent earnings level of CA$171m to the final forecast of CA$324m by 2022. EPS reaches CA$2.85 in the final year of forecast compared to the current CA$1.51 EPS today. With a current profit margin of 5.1%, this movement will result in a margin of 8.3% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Stantec, there are three important aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Stantec worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Stantec is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Stantec? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.