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1. Company Snapshot

1.a. Company Description

Stantec Inc.provides engineering, architecture, and environmental consulting services in the areas of infrastructure and facilities in Canada, the United States, and internationally.The company provides consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics.


It also offers structural, mechanical, electrical, plumbing, and hydraulics engineering services; transportation advisory, planning and analytics, transport engineering, and technical design; paleontological and archaeological services for the rail, transportation, water, and power and energy sectors; environmental and infrastructure services; and environmental and cultural resource compliance services.The company was formerly known as Stanley Technology Group Inc.and changed its name to Stantec Inc.


in October 1998.Stantec Inc.was founded in 1954 and is headquartered in Edmonton, Canada.

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1.b. Last Insights on STN

Stantec Inc.'s recent performance was negatively impacted by a lowered price target to C$169.00 from Stifel Canada, despite the firm reiterating its buy rating. The company's Q3 earnings matched estimates, but revenue surprised negatively by 0.46%. Although Stantec reported strong Q3 results, including record revenue growth, a 100 basis point increase in adjusted EBITDA margin, and a 17.8% increase in adjusted EBITDA, investors may be concerned about the company's ability to sustain growth. The integration of the Page acquisition drove growth in the Buildings business.

1.c. Company Highlights

2. Stantec's Q3 Earnings: A Robust Performance

Stantec delivered a robust performance in the third quarter, with net revenue growing to $1.7 billion, a 12% increase from Q3 2024, driven by organic and acquisition growth. Adjusted EBITDA grew by 18% year-over-year with a record margin of 19%, and adjusted EPS increased by 17.7% to $1.53, beating estimates of $1.25. The company's financial performance was driven by strong demand for their services in the water, transportation, energy transition, and mission-critical sectors.

Publication Date: Nov -15

📋 Highlights
  • Q3 Net Revenue Growth: Surpassed $1.7 billion, reflecting 12% year-over-year growth driven by organic (4.6%) and acquisition (9%) gains.
  • Adjusted EBITDA Margin: Reached record 19%, up 18% YoY, with EBITDA margin improving to 17.7% year-to-date, up 100 basis points YoY.
  • U.S. Revenue Growth: Rose 14% YoY, fueled by 4.6% organic growth and 9% acquisition growth, with Buildings business surging over 40% in Q3.
  • Contract Backlog: Hit $8.4 billion, a 15% YoY increase, driven by 6.6% organic growth in the U.S. and 6.8% globally.
  • EBITDA Margin Target: Set for 17-18% over three years, supported by improved project margins and operational efficiencies (DSO reduced to 73-74).

Segmental Performance

Stantec's U.S. business saw net revenue increase by 14% in the third quarter, driven by 4.6% organic growth and almost 9% acquisition growth. The Buildings business grew by over 40% in Q3 and over 20% year-to-date, driven by the acquisition of Page and continued organic growth. In Canada, net revenue grew 7.6% in the quarter, driven by organic growth. The global business delivered net revenue growth of almost 11% in the third quarter, achieving 5.5% organic and 2.8% acquisition growth.

Valuation Metrics

With a P/E Ratio of 38.82, P/B Ratio of 5.57, and EV/EBITDA of 21.19, Stantec's valuation metrics indicate a premium valuation. However, the company's strong financial performance and growth prospects may justify this premium. The company's ROIC of 14.72% and ROE of 14.85% also indicate a strong return on investment.

Growth Prospects

Stantec is optimistic about 2026, citing strong momentum in global water business, energy transition, and infrastructure. The company sees opportunities in the Canadian market, including the federal budget's support for infrastructure investments. Analysts estimate next year's revenue growth at 10.5%, which is in line with the company's guidance of 10-12% net revenue growth for the full year.

Contract Backlog and M&A

Stantec's contract backlog stood at $8.4 billion at the end of the third quarter, an almost 15% increase year-over-year. The company was awarded several significant project wins across each of their 5 business verticals. The M&A pipeline remains robust, with ongoing discussions and a positive outlook from Stantec's Board and investor community. Vito Culmone stated that the company maintains a positive view on M&A and is supportive of exploring opportunities.

Margin Expansion

Stantec's EBITDA margin has improved to 17.7% year-to-date, with a 100 basis point increase over the prior year. The company expects continued EBITDA margin expansion, with a target of 17% to 18% over the next 3 years. This is attributed to project margins, admin and marketing as a percentage of NSR, utilization, and occupancy costs.

3. NewsRoom

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Stantec awarded second phase of European Commission’s Global Technical Assistance Facility for Sustainable Energy

Dec -04

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Report shows how AI drives shift in UK engineering and consultancy sector

Dec -02

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Will Weakness in Stantec Inc.'s (TSE:STN) Stock Prove Temporary Given Strong Fundamentals?

Nov -30

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Upcycle Minerals Inc. Advances Tuxford Project and Provides Corporate Update

Nov -24

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Stantec Buy Rating Reiterated at Stifel Canada Following Q3 Results; Price Target Lowered to C$169.00

Nov -17

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Raised Guidance and Record Margins Could Be a Game Changer for Stantec (TSX:STN)

Nov -16

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Stantec Inc (STN) Q3 2025 Earnings Call Highlights: Record Revenue Growth and Strategic ...

Nov -14

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Stantec (STN) Q3 Earnings Match Estimates

Nov -14

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.47%)

6. Segments

Infrastructure

Expected Growth: 8%

Stantec's Infrastructure segment growth is driven by increasing government investments in transportation and water infrastructure, rising demand for sustainable and resilient infrastructure, and growing need for digital infrastructure solutions. Additionally, the company's strategic acquisitions and expansion into new markets have contributed to its growth.

Environmental Services

Expected Growth: 7%

Stantec's Environmental Services segment growth is driven by increasing demand for sustainable infrastructure, government regulations, and private sector investments in environmental projects. The company's expertise in water and waste management, environmental impact assessments, and climate change resilience also contribute to its growth. Additionally, the rising importance of ESG considerations and the need for companies to reduce their environmental footprint further support this segment's 7% growth.

Water

Expected Growth: 6%

Stantec Inc.'s Water segment growth is driven by increasing demand for water infrastructure upgrades, stringent environmental regulations, and aging infrastructure replacement. Additionally, population growth, urbanization, and climate change are fueling the need for sustainable water management solutions, further boosting segment growth.

Buildings

Expected Growth: 8%

Stantec Inc.'s Buildings segment growth is driven by increasing demand for sustainable and energy-efficient designs, government investments in infrastructure, and a growing need for modernization of existing buildings. Additionally, the company's expertise in healthcare and education facilities, as well as its strong presence in the US and Canadian markets, contribute to its 8% growth.

Energy & Resources

Expected Growth: 9%

Stantec Inc.'s Energy & Resources segment growth is driven by increasing global demand for renewable energy, infrastructure development, and government initiatives promoting sustainable practices. Rising energy prices, advancements in clean technologies, and growing investments in energy storage and transmission also contribute to the 9% growth.

7. Detailed Products

Architecture

Stantec's architecture services provide innovative and sustainable design solutions for buildings, communities, and cities.

Engineering

Stantec's engineering services provide comprehensive solutions for infrastructure, transportation, and industrial projects.

Environmental Services

Stantec's environmental services provide sustainable solutions for environmental assessments, permitting, and compliance.

Water

Stantec's water services provide innovative solutions for water treatment, wastewater management, and flood protection.

Transportation

Stantec's transportation services provide planning, design, and engineering solutions for roads, highways, and airports.

Community Development

Stantec's community development services provide planning, design, and engineering solutions for urban planning and development projects.

Energy and Resources

Stantec's energy and resources services provide solutions for oil and gas, mining, and renewable energy projects.

8. Stantec Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Stantec Inc. operates in a highly competitive industry, and there are many substitutes available to customers. However, the company's strong brand reputation and diversified services help to mitigate the threat of substitutes.

Bargaining Power Of Customers

Stantec Inc. has a large and diversified customer base, which reduces the bargaining power of individual customers. Additionally, the company's services are often customized to meet specific customer needs, making it difficult for customers to switch to alternative providers.

Bargaining Power Of Suppliers

Stantec Inc. relies on a network of suppliers to provide goods and services. While the company has some bargaining power due to its size and reputation, suppliers still have some negotiating power, particularly in industries where there are few alternative suppliers.

Threat Of New Entrants

The engineering and design services industry has high barriers to entry, including significant capital requirements and the need for specialized expertise. This makes it difficult for new entrants to compete with established players like Stantec Inc.

Intensity Of Rivalry

The engineering and design services industry is highly competitive, with many established players competing for market share. Stantec Inc. faces intense competition from rivals, which can lead to pricing pressure and reduced profit margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 31.27%
Debt Cost 7.53%
Equity Weight 68.73%
Equity Cost 8.28%
WACC 8.05%
Leverage 45.49%

11. Quality Control: Stantec Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Stantec

A-Score: 5.8/10

Value: 2.1

Growth: 6.6

Quality: 6.4

Yield: 2.0

Momentum: 8.0

Volatility: 9.7

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Primoris Services

A-Score: 5.2/10

Value: 3.4

Growth: 8.6

Quality: 4.7

Yield: 0.0

Momentum: 10.0

Volatility: 4.7

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IES Holdings

A-Score: 5.2/10

Value: 2.2

Growth: 9.7

Quality: 7.1

Yield: 0.0

Momentum: 9.5

Volatility: 2.7

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Comfort Systems USA

A-Score: 5.2/10

Value: 1.2

Growth: 9.8

Quality: 7.2

Yield: 0.0

Momentum: 9.5

Volatility: 3.3

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Sterling Infrastructure

A-Score: 5.1/10

Value: 1.5

Growth: 8.7

Quality: 7.3

Yield: 0.0

Momentum: 9.5

Volatility: 3.3

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Tetra Tech

A-Score: 4.3/10

Value: 3.0

Growth: 7.3

Quality: 5.5

Yield: 1.0

Momentum: 1.0

Volatility: 8.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

131.55$

Current Price

131.55$

Potential

-0.00%

Expected Cash-Flows