NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.1%. Since the same quarter one year prior, revenues rose by 10.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 85.77% to -$1.88 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 58.78%.
- The gross profit margin for STANTEC INC is rather high; currently it is at 54.40%. Regardless of STN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STN's net profit margin of 6.70% compares favorably to the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Professional Services industry and the overall market on the basis of return on equity, STANTEC INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, STN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
Stantec Inc. The company has a P/E ratio of 87.4, above the average diversified services industry P/E ratio of 73.4 and above the S&P 500 P/E ratio of 17.7. Stantec has a market cap of $1.24 billion and is part of the
industry. Shares are down 1.2% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.