NEW YORK ( TheStreet) -- Stantec (NYSE: STN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • STANTEC INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, STANTEC INC increased its bottom line by earning $2.04 versus $1.22 in the prior year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.6%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that STN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.63 is high and demonstrates strong liquidity.
  • 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to $3.14 million or 87.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Stantec Inc. The company has a P/E ratio of 9.7, above the average diversified services industry P/E ratio of 9.4 and below the S&P 500 P/E ratio of 17.7. Stantec has a market cap of $1 billion and is part of the services sector and diversified services industry. Shares are down 16% year to date as of the close of trading on Wednesday.

You can view the full Stantec Ratings Report or get investment ideas from our investment research center.
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