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Stantec Inc (TSE:STN)
TSX:STN
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Stantec
(TSX:STN)
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Rating:66Neutral
Price Target:
C$136.00
▲(7.54% Upside)
Action:DowngradedDate:02/28/26
The score is driven primarily by solid financial performance (strong growth and cash conversion) and a constructive earnings outlook with improving margin guidance. These positives are tempered by weaker technical trend signals (below key moving averages, negative MACD) and a higher valuation (P/E ~30 with a low dividend yield), alongside balance-sheet leverage and 2025 margin pressure as key watch items.
Positive Factors
Cash generation strength
Consistently high free cash flow conversion (~92% of net income in 2025) gives Stantec durable internal funding for capex, M&A, and dividends, lowers reliance on external financing, and improves resilience to cyclical project timing over the next 2–6 months.
Substantial contract backlog
A backlog near $8.6B provides multi-month revenue visibility and operational planning runway, supporting utilization and cash flow. Sustained backlog growth reduces near-term revenue volatility and underpins midterm organic growth across regions and business units.
Strong wins & sector diversification
Repeated awards across water, energy and government programs (e.g., Scottish Water preferred bidder, NAVFAC JV, EU TAF phase two) show competitive positioning in long-duration public and sustainability projects, diversifying revenue and lengthening contract tails.
Negative Factors
Rising leverage
Debt-to-equity rising to ~1.0 reduces financial flexibility and raises interest and covenant risk if market conditions worsen. With project margins subject to variability, higher leverage increases downside risk to cash flow and limits optionality for strategic investments.
Margin pressure in 2025
Reported margin compression in 2025 (lower gross and EBIT margins) suggests cost or mix pressures. If sustained, slimmer margins could erode the company’s recent EBITDA gains and weaken free cash flow resilience, especially given elevated borrowing levels.
U.S. federal backlog visibility risk
Slower federal contract signings and flat U.S. backlog reduce near-term visibility in a key market. Delays in procurement can push project starts and cash receipts later, magnifying the impact of margin pressure and reliance on backlog to sustain growth.
Stantec (STN) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$14.72B
Dividend Yield0.67%
Average Volume (3M)459.52K
Price to Earnings (P/E)30.8
Beta (1Y)0.78
Revenue Growth11.73%
EPS Growth41.17%
CountryCA
Employees32,000
SectorIndustrials
Sector Strength72
IndustryEngineering & Construction
Share Statistics
EPS (TTM)1.25
Shares Outstanding114,066,990
10 Day Avg. Volume583,409
30 Day Avg. Volume459,524
Financial Highlights & Ratios
PEG Ratio0.95
Price to Book (P/B)4.56
Price to Sales (P/S)1.81
P/FCF Ratio18.68
Enterprise Value/Market Cap1.15
Enterprise Value/Revenue2.29
Enterprise Value/Gross Profit4.96
Enterprise Value/Ebitda15.87
Forecast
1Y Price Target
$162.87Price Target Upside28.79% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
EPS Forecast (FY)6.15
Revenue Forecast (FY)$7.14B
Stantec Business Overview & Revenue Model
Company DescriptionStantec 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.
How the Company Makes MoneyStantec generates revenue primarily through the provision of professional services in engineering, architecture, and consulting. The company operates on a fee-for-service model, charging clients for its expertise in project planning, design, and management. Key revenue streams include contracts for infrastructure projects, environmental assessments, and building design services. Stantec also benefits from long-term partnerships with government agencies and private enterprises, which provide a steady flow of projects. Additionally, the company pursues opportunities in various markets, including renewable energy and urban development, which contribute to its earnings. Stantec's focus on sustainability and community engagement enhances its competitive positioning and opens avenues for securing new contracts.
Stantec Earnings Call Summary
Earnings Call Date:Nov 13, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:May 13, 2026
Earnings Call Sentiment Positive
Stantec reported strong financial performance with significant revenue and adjusted EBITDA growth, particularly in the Water and Energy segments. The U.S. market showed robust growth, although there were challenges with federal contract signings affecting backlog visibility. Overall, the company demonstrated resilience and a positive outlook for future growth.Q3-2025 Updates
Positive Updates
Strong Revenue Growth
Net revenue grew to $1.7 billion in Q3 2025, an increase of almost 12% compared to Q3 of last year, driven by organic and acquisition growth, each over 5%.
Record-High Adjusted EBITDA Margin
Stantec achieved an all-time high adjusted EBITDA margin of 19%, a 100 basis point increase compared to Q3 of last year.
Significant Growth in Water and Energy Segments
Water business delivered almost 13% organic growth, Energy & Resources delivered nearly 10%. Double-digit growth was also seen in certain geographies for these sectors.
Strong Performance in U.S. Market
In the U.S., net revenue increased over 14% in Q3, with 4.6% organic growth and 9% acquisition growth.
Impressive Adjusted EPS Growth
Adjusted EPS grew by 17.7% compared to Q3 2024.
Increase in Contract Backlog
Contract backlog stood at $8.4 billion, an almost 15% increase year-over-year, representing approximately 13 months of work.
Strong Cash Flow and Liquidity
Year-to-date operating cash flows are up 86% compared to 2024, reflecting strong revenue growth and operational performance.
Negative Updates
Flat Backlog Growth in U.S.
Year-to-date backlog in the U.S. has been flat, largely due to slower procurement cycles and delays in project signings.
Challenges in Federal Contracting
The U.S. saw a slowdown in federal contract signings due to government shutdown and procedural changes, affecting backlog visibility.
Company Guidance
During Stantec's Third Quarter 2025 Results Webcast and Conference Call, the company reported strong financial performance, driven by robust organic growth across all regions and business units. Net revenue for the third quarter was $1.7 billion, reflecting an almost 12% increase from Q3 2024, with organic and acquisition growth each surpassing 5%. The Water business achieved nearly 13% organic growth, while Energy & Resources saw close to 10% growth. Stantec's adjusted EBITDA grew by approximately 18%, reaching a record margin of 19%. Adjusted EPS increased by 17.7% compared to the same period last year. The U.S. market experienced a net revenue increase of over 14%, with 4.6% organic growth and nearly 9% from acquisitions. Canada reported a 7.6% net revenue growth entirely from organic sources, bolstered by strong performance in Water and Energy & Resources sectors. The global business achieved nearly 11% net revenue growth, with significant contributions from the water infrastructure projects in the U.K., Australia, and New Zealand. The company's contract backlog at the end of Q3 stood at $8.4 billion, up nearly 15% year-over-year, indicating approximately 13 months of work. Stantec adjusted its full-year net revenue growth guidance and increased its adjusted EBITDA margin outlook to 17.2-17.5%, anticipating continued demand across various sectors, including infrastructure, energy transition, and mission-critical facilities.Stantec Financial Statement Overview
Summary
Strong multi-year revenue growth and solid profitability, supported by strong cash conversion (free cash flow ~92% of net income in 2025). Offsets include higher leverage (debt-to-equity ~1.0 in 2025) and signs of 2025 margin pressure versus 2023–2024.Income Statement
Stantec shows a strong growth profile, with revenue rising consistently from 2022–2025 (including ~20% growth in 2025). Profitability is solid and generally stable for the industry, with net margins holding around ~5–6% over the period and EBITDA margins improving versus earlier years. The main weakness is margin pressure in 2025 (notably lower gross and EBIT margins versus 2023–2024), suggesting higher costs or mix/headwinds despite strong top-line momentum.78
Positive
Balance Sheet
The balance sheet is reasonable but has become more leveraged: debt-to-equity moved up to ~1.0 in 2025 from ~0.69 in 2023–2024, indicating a higher reliance on debt financing. Offsetting this, returns to shareholders improved (return on equity ~15% in 2025 vs. ~11–13% in prior years), and equity has grown over time. Key risk is reduced financial flexibility if higher debt persists alongside any further margin compression.69
Positive
Cash Flow
Cash generation is a clear strength: operating cash flow and free cash flow are high relative to earnings, with free cash flow running at ~92% of net income in 2025 (and consistently strong in prior years). However, free cash flow growth dipped slightly in 2025 after strong gains in 2023–2024, and operating cash flow relative to revenue remains moderate, which can create some variability year-to-year.74
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 8.14B | 5.87B | 5.07B | 4.46B | 3.64B |
| Gross Profit | 3.18B | 3.20B | 2.74B | 2.42B | 1.96B |
| EBITDA | 1.10B | 812.50M | 682.40M | 568.80M | 411.40M |
| Net Income | 479.40M | 361.50M | 316.50M | 247.00M | 200.70M |
Balance Sheet | |||||
| Total Assets | 7.96B | 6.96B | 5.77B | 5.65B | 5.23B |
| Cash, Cash Equivalents and Short-Term Investments | 398.10M | 228.50M | 352.90M | 148.30M | 193.90M |
| Total Debt | 3.13B | 2.04B | 1.70B | 1.92B | 1.92B |
| Total Liabilities | 4.72B | 4.01B | 3.32B | 3.37B | 3.22B |
| Stockholders Equity | 3.24B | 2.95B | 2.45B | 2.29B | 2.00B |
Cash Flow | |||||
| Free Cash Flow | 791.00M | 504.10M | 419.40M | 235.80M | 351.20M |
| Operating Cash Flow | 862.90M | 603.10M | 520.00M | 304.30M | 397.00M |
| Investing Cash Flow | -534.10M | -605.00M | -201.70M | -73.80M | -764.80M |
| Financing Cash Flow | -139.50M | -152.10M | -109.30M | -296.70M | 276.50M |
Stantec Technical Analysis
Negative
126.46
Price Trends
132.16
Negative
138.08
Negative
143.32
Negative
Market Momentum
-2.05
Negative
46.55
Neutral
76.88
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:STN, the sentiment is Negative. The current price of 126.46 is below the 20-day moving average (MA) of 127.52, below the 50-day MA of 132.16, and below the 200-day MA of 143.32, indicating a bearish trend. The MACD of -2.05 indicates Negative momentum. The RSI at 46.55 is Neutral, neither overbought nor oversold. The STOCH value of 76.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:STN.
Stantec Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | C$15.94B | 5.72 | 56.38% | 0.09% | 13.97% | 715.65% | |
70 Outperform | C$31.68B | 33.67 | 11.21% | 0.60% | 18.85% | 29.60% | |
69 Neutral | C$1.80B | 13.18 | 21.68% | 2.88% | 6.26% | 0.52% | |
66 Neutral | $14.72B | 30.82 | 15.59% | 0.67% | 11.73% | 41.17% | |
66 Neutral | C$2.50B | 12.95 | 22.05% | 0.99% | 13.02% | 52.88% | |
65 Neutral | C$2.39B | 9.42 | 0.92% | 2.38% | 25.68% | ― | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.