The Assets Go Home At Night

Jul 17th, 2009 – Comment

  Hello Lou, I would very much appreciate your analysis and outlook for Stantec Inc. (STN), especially in light of the following. Firstly, both the CEO and CFO’s sudden departure from the company earlier this year – both at a relatively young age. Secondly, and what may be related to the first, Goodwill and Intangible […]


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stantec

Hello Lou,

I would very much appreciate your analysis and outlook for Stantec Inc. (STN), especially in light of the following. Firstly, both the CEO and CFO’s sudden departure from the company earlier this year – both at a relatively young age. Secondly, and what may be related to the first, Goodwill and Intangible Assets on the Balance Sheet nearly equate to Total Shareholder Equity — and growing. At some stage, will this not have to be written down, and if so, appears that could go on for years to come.

Thank you Lou. Your ongoing analysis of companies is very much appreciated.

 Don
Ottawa, ON

 

Hi Don,

Thanks for the assignment. I havent looked at Stantec Inc ( STN TSX) in a while and with the infrastructure spending scheduled to wash through the engineering, design, construction industries in the next several years its a good time to look under the hood.

Let me first address your concerns about the departure of President and CEO Tony Franceschini at age 57. Tony had been with the company since 1978 and worked his way up the ranks over a 30 year stint. That looks more like a planned exit after a lifetime of accomplishment that a sudden bolt for the exit.

CFO Don Wilson star with the company s and is 52.  Again a long tenure and lots of accomplishments over an 18 year period. Franceschini and Wilson were part of a management team that grew the company from $100M in revenue to just over $1B. They also closed something like 65 acquisitions to get that growth and that’s the where the good will and intangible assets come into play.

When you acquire design, engineering, construction companies what you are buying is brain power, some number of drafting tables and computers. Its also part of the culture of these types of organizations that you have to make room for the young cadre of men and women who will take the organization into the future. When you buy shares in STN you are buying a team of capable people generating free cash flow that has been used to grow through acquisitions.

stn2

The three year chart shows that the stock has met resistance at $29 and has not been able to breakthrough the barrier.

The chart also indicates support at $25.

 

 

 

 

 

 

 

 

 

 

 

stn3

The three month chart illustrates  the range bound pattern with the MACD flattening and looking like it is turning higher.

I think the best approach to STN is to trade it in the range and put a stop in below $25 to preserve capital.

 

Happy Capitalism!

Categories: Infrastructure
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