Aecon Group (TSX:ARE) - Share price, News & Analysis

Q: What is the Fair Price of ARE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

ARE (CA$13.43) is trading below our estimate of [[fair value]] (CA$30.05)

ARE fundamental analysis
Snowflake Score
Valuation	6/6
Future Growth	3/6
Past Performance	1/6
Financial Health	4/6
Dividends	5/6

ARE Stock Overview

Aecon Group Inc., together with its subsidiaries, provide construction and infrastructure development services to private and public sector clients in Canada, the United States, and internationally.

Rewards

Trading at 55.3% below our estimate of its fair value

Earnings are forecast to grow 24.88% per year

Risk Analysis

High level of non-cash earnings

Dividend of 5.51% is not well covered by earnings

Profit margins (1.2%) are lower than last year (2.2%)

Aecon Group Competitors

Bird Construction

TSX:BDT

CA$418.8m

SNC-Lavalin Group

TSX:SNC

CA$4.0b

WSP Global

TSX:WSP

CA$16.9b

Ag Growth International

TSX:AFN

CA$585.0m

Price History & Performance

Summary of all time highs, changes and price drops for Aecon Group
Historical stock prices
Current Share Price	CA$13.43
52 Week High	CA$22.28
52 Week Low	CA$12.98
Beta	0.95
1 Month Change	-10.17%
3 Month Change	-21.05%
1 Year Change	-24.76%
3 Year Change	-29.94%
5 Year Change	-16.79%
Change since IPO	-80.07%

Recent News & Updates

Jun 17

Is Now The Time To Look At Buying Aecon Group Inc. (TSE:ARE)?

Aecon Group Inc. ( TSE:ARE ), is not the largest company out there, but it saw significant share price movement during...

Shareholder Returns

	ARE	CA Construction	CA Market
7D	-0.7%	1.5%	0.3%
1Y	-24.8%	-11.6%	-4.0%

Return vs Industry: ARE underperformed the Canadian Construction industry which returned -11.6% over the past year.

Return vs Market: ARE underperformed the Canadian Market which returned -4% over the past year.

Price Volatility

Is ARE's price volatile compared to industry and market?
ARE volatility
ARE Average Weekly Movement	3.9%
Construction Industry Average Movement	4.8%
Market Average Movement	10.0%
10% most volatile stocks in CA Market	17.3%
10% least volatile stocks in CA Market	4.4%

Stable Share Price: ARE is less volatile than 75% of Canadian stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: ARE's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1877	5,600	Jean-Louis Servranckx	https://www.aecon.com

Aecon Group Inc., together with its subsidiaries, provide construction and infrastructure development services to private and public sector clients in Canada, the United States, and internationally. It operates through two segments, Construction and Concessions. The Construction segment focuses primarily on the civil infrastructure, urban transportation systems, nuclear power infrastructure, utility infrastructure, and conventional industrial infrastructure market sectors.

Aecon Group Fundamentals Summary

How do Aecon Group's earnings and revenue compare to its market cap?
ARE fundamental statistics
Market Cap	CA$808.49m
Earnings (TTM)	CA$50.65m
Revenue (TTM)	CA$4.21b

16.2x

P/E Ratio

0.2x

P/S Ratio

Is ARE overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
ARE income statement (TTM)
Revenue	CA$4.21b
Cost of Revenue	CA$3.88b
Gross Profit	CA$331.88m
Other Expenses	CA$281.23m
Earnings	CA$50.65m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Jul 28, 2022

Earnings per share (EPS)	0.83
Gross Margin	7.88%
Net Profit Margin	1.20%
Debt/Equity Ratio	77.3%

How did ARE perform over the long term?

See historical performance and comparison

Dividends

5.5%

Current Dividend Yield

85%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is ARE undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

6/6

Valuation Score 6/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ARE?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for ARE. This is calculated by dividing ARE's market cap by their current preferred multiple.
What is ARE's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	CA$808.49m

ARE key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.3x
Enterprise Value/EBITDA	11x
PEG Ratio	0.6x

Price to Earnings Ratio vs Peers

How does ARE's PE Ratio compare to its peers?

ARE PE Ratio vs Peers

The above table shows the PE ratio for ARE vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	39.9x
BDT Bird Construction	10x	20.8%	CA$418.8m
SNC SNC-Lavalin Group	69.6x	30.1%	CA$4.0b
WSP WSP Global	35.2x	18.2%	CA$16.9b
AFN Ag Growth International	44.9x	35.2%	CA$585.0m
ARE Aecon Group	16.2x	24.9%	CA$818.2m

Forward PE

Price-To-Earnings vs Peers: ARE is good value based on its Price-To-Earnings Ratio (16.2x) compared to the peer average (39.9x).

Price to Earnings Ratio vs Industry

How does ARE's PE Ratio compare vs other companies in the North American Construction Industry?

Price-To-Earnings vs Industry: ARE is good value based on its Price-To-Earnings Ratio (16.2x) compared to the North American Construction industry average (23.9x)

Price to Earnings Ratio vs Fair Ratio

What is ARE's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ARE PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	16.2x
Fair PE Ratio	21.5x

Price-To-Earnings vs Fair Ratio: ARE is good value based on its Price-To-Earnings Ratio (16.2x) compared to the estimated Fair Price-To-Earnings Ratio (21.5x).

Share Price vs Fair Value

What is the Fair Price of ARE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ARE (CA$13.43) is trading below our estimate of fair value (CA$30.05)

Significantly Below Fair Value: ARE is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: ARE is good value based on its PEG Ratio (0.6x)

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Future Growth

How is Aecon Group forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

24.9%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: ARE's forecast earnings growth (24.9% per year) is above the savings rate (1.6%).

Earnings vs Market: ARE's earnings (24.9% per year) are forecast to grow faster than the Canadian market (8.2% per year).

High Growth Earnings: ARE's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: ARE's revenue (0.9% per year) is forecast to grow slower than the Canadian market (6.9% per year).

High Growth Revenue: ARE's revenue (0.9% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: ARE's Return on Equity is forecast to be low in 3 years time (8.2%).

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Past Performance

How has Aecon Group performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

13.8%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ARE has a high level of non-cash earnings.

Growing Profit Margin: ARE's current net profit margins (1.2%) are lower than last year (2.2%).

Past Earnings Growth Analysis

Earnings Trend: ARE's earnings have grown by 13.8% per year over the past 5 years.

Accelerating Growth: ARE's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ARE had negative earnings growth (-37.5%) over the past year, making it difficult to compare to the Construction industry average (-0.1%).

Return on Equity

High ROE: ARE's Return on Equity (5.7%) is considered low.

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Financial Health

How is Aecon Group's financial position?

Financial Health Score

4/6

Financial Health Score 4/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: ARE's short term assets (CA$2.1B) exceed its short term liabilities (CA$1.5B).

Long Term Liabilities: ARE's short term assets (CA$2.1B) exceed its long term liabilities (CA$901.4M).

Debt to Equity History and Analysis

Debt Level: ARE's net debt to equity ratio (28.8%) is considered satisfactory.

Reducing Debt: ARE's debt to equity ratio has reduced from 96.6% to 77.3% over the past 5 years.

Debt Coverage: ARE's operating cash flow is negative, therefore debt is not well covered.

Interest Coverage: ARE's interest payments on its debt are not well covered by EBIT (1.4x coverage).

Balance Sheet

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Dividend

What is Aecon Group current dividend yield, its reliability and sustainability?

Dividend Score

6/6

Dividend Score 6/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

5.51%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: ARE's dividend (5.51%) is higher than the bottom 25% of dividend payers in the Canadian market (2.03%).

High Dividend: ARE's dividend (5.51%) is in the top 25% of dividend payers in the Canadian market (5.33%)

Stability and Growth of Payments

Stable Dividend: ARE's dividends per share have been stable in the past 10 years.

Growing Dividend: ARE's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: At its current payout ratio (84.8%), ARE's payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: ARE is paying a dividend but the company has no free cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

5.5yrs

Average management tenure

CEO

Jean-Louis Servranckx (60 yo)

3.75yrs

Tenure

CA$6,913,390

Compensation

Mr. Jean-Louis Servranckx has been President and Chief Executive Officer of Aecon Group Inc. since September 4, 2018 and serves as its Director since October 25, 2018. He has experience in the construction...

CEO Compensation Analysis

Compensation vs Market: Jean-Louis's total compensation ($USD5.37M) is above average for companies of similar size in the Canadian market ($USD1.57M).

Compensation vs Earnings: Jean-Louis's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.

Leadership Team

Experienced Management: ARE's management team is seasoned and experienced (5.5 years average tenure).

Board Members

Experienced Board: ARE's board of directors are considered experienced (5.5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/27 00:00
End of Day Share Price	2022/06/27 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31