TSX:ARE

Stock Analysis Report

Executive Summary

Aecon Group Inc. provides construction and infrastructure development services to private and public sector clients in Canada, the United States, and internationally.


Snowflake Analysis

Established dividend payer and good value.


Similar Companies

Share Price & News

How has Aecon Group's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ARE has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-8.8%

ARE

-4.8%

CA Construction

-1.5%

CA Market


1 Year Return

-9.2%

ARE

4.3%

CA Construction

2.5%

CA Market

Return vs Industry: ARE underperformed the Canadian Construction industry which returned 4.3% over the past year.

Return vs Market: ARE underperformed the Canadian Market which returned 2.5% over the past year.


Shareholder returns

AREIndustryMarket
7 Day-8.8%-4.8%-1.5%
30 Day-5.3%-2.3%-0.7%
90 Day-9.3%9.4%1.8%
1 Year-6.3%-9.2%6.0%4.3%5.7%2.5%
3 Year13.5%3.7%9.0%2.5%16.8%6.2%
5 Year66.3%43.3%48.2%31.4%32.0%12.8%

Price Volatility Vs. Market

How volatile is Aecon Group's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Aecon Group undervalued compared to its fair value and its price relative to the market?

20.0%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ARE (CA$17.14) is trading below our estimate of fair value (CA$20.67)

Significantly Below Fair Value: ARE is trading below fair value, but not by a significant amount.


Price To Earnings Ratio

PE vs Industry: ARE is good value based on its PE Ratio (12.9x) compared to the Construction industry average (17.6x).

PE vs Market: ARE is good value based on its PE Ratio (12.9x) compared to the Canadian market (16x).


Price to Earnings Growth Ratio

PEG Ratio: ARE is poor value based on its PEG Ratio (9.4x)


Price to Book Ratio

PB vs Industry: ARE is good value based on its PB Ratio (1.2x) compared to the CA Construction industry average (2.3x).


Next Steps

Future Growth

How is Aecon Group forecast to perform in the next 1 to 3 years based on estimates from 10 analysts?

1.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ARE's forecast earnings growth (1.4% per year) is below the savings rate (1.4%).

Earnings vs Market: ARE's earnings (1.4% per year) are forecast to grow slower than the Canadian market (11.1% per year).

High Growth Earnings: ARE's earnings are forecast to grow, but not significantly.

Revenue vs Market: ARE's revenue (3.6% per year) is forecast to grow slower than the Canadian market (4.6% per year).

High Growth Revenue: ARE's revenue (3.6% 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 (8.6%).


Next Steps

Past Performance

How has Aecon Group performed over the past 5 years?

6.8%

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 (2.3%) are higher than last year (1.7%).


Past Earnings Growth Analysis

Earnings Trend: ARE's earnings have grown by 6.8% per year over the past 5 years.

Accelerating Growth: ARE's earnings growth over the past year (54.2%) exceeds its 5-year average (6.8% per year).

Earnings vs Industry: ARE earnings growth over the past year (54.2%) exceeded the Construction industry 4.6%.


Return on Equity

High ROE: ARE's Return on Equity (9.4%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Aecon Group's financial position?


Financial Position Analysis

Short Term Liabilities: ARE's short term assets (CA$2.2B) exceed its short term liabilities (CA$1.4B).

Long Term Liabilities: ARE's short term assets (CA$2.2B) exceed its long term liabilities (CA$910.1M).


Debt to Equity History and Analysis

Debt Level: ARE's debt to equity ratio (80.7%) is considered high.

Reducing Debt: ARE's debt to equity ratio has reduced from 86.2% to 80.7% 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 well covered by EBIT (4.6x coverage).


Balance Sheet

Inventory Level: ARE has a low level of unsold assets or inventory.

Debt Coverage by Assets: ARE's debt is covered by short term assets (assets are 3.2x debt).


Next Steps

Dividend

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

3.51%

Current Dividend Yield


Dividend Yield vs Market

company3.5%marketbottom25%2.0%markettop25%5.6%industryaverage1.4%forecastin3Years3.6%

Current dividend yield vs market & industry

Notable Dividend: ARE's dividend (3.38%) is higher than the bottom 25% of dividend payers in the Canadian market (2%).

High Dividend: ARE's dividend (3.38%) is low compared to the top 25% of dividend payers in the Canadian market (5.6%).


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.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (42.1%), ARE's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ARE's dividends in 3 years are forecast to be well covered by earnings (43.4% payout ratio).


Next Steps

Management

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

2.6yrs

Average management tenure


CEO

Jean-Louis Servranckx (58yo)

1.4yrs

Tenure

CA$3,098,907

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. 


CEO Compensation Analysis

Compensation vs Market: Jean-Louis's total compensation ($USD2.33M) is above average for companies of similar size in the Canadian market ($USD1.60M).

Compensation vs Earnings: Insufficient data to compare Jean-Louis's compensation with company performance.


Leadership Team

NamePositionTenureCompensationOwnership
Jean-Louis Servranckx
President1.4yrsCA$3.10m0.012% CA$129.9k
David Smales
Executive VP & CFO10.3yrsCA$2.71m0.038% CA$400.3k
Yonni Fushman
Executive VP2.6yrsCA$1.95m0.0035% CA$36.6k
Steven Nackan
Executive VP & President of Concessions1.1yrsCA$1.58mno data
Mark Scherer
Executive VP of Industrial & Chief Safety Officer4.4yrsCA$1.63mno data
Adam Borgatti
Senior Vice President of Corporate Development & Investor Relations2.1yrsno data0.0021% CA$22.3k
Gordana Terkalas
Senior Vice President of Human Resources1.7yrsno datano data
Mathew Kattapuram
Senior Vice President of Strategic Business Development8.1yrsCA$696.64kno data
John Singleton
Senior Vice President of Industrial East & West9.1yrsno datano data
Alistair MacCallum
Senior Vice President of Finance0yrsno data0.00033% CA$3.4k

2.6yrs

Average Tenure

Experienced Management: ARE's management team is considered experienced (2.6 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Jean-Louis Servranckx
President1.4yrsCA$3.10m0.012% CA$129.9k
Monica Sloan
Independent Director6.7yrsCA$206.00k0.013% CA$137.2k
Anthony Franceschini
Independent Director10.9yrsCA$237.50k0.15% CA$1.5m
Eric Rosenfeld
Independent Director2.7yrsCA$213.50kno data
John Beck
Non-Executive Chairman1.4yrsCA$4.94m0.089% CA$923.9k
James Hole
Independent Director10.8yrsCA$232.00k1.07% CA$11.1m
Susan Jenah
Independent Director3.7yrsCA$217.50k0.0035% CA$36.3k
John Brace
Independent Director0.7yrsno data0.0044% CA$46.3k
Joseph Carrabba
Lead Director0yrsCA$246.50k0.016% CA$171.4k
Deborah Stein
Independent Director0.7yrsno data0.0049% CA$50.8k

2.7yrs

Average Tenure

64yo

Average Age

Experienced Board: ARE's board of directors are not considered experienced ( 2.7 years average tenure), which suggests a new board.


Ownership

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


Insider Trading Volume

Insider Buying: ARE 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.


Top Shareholders

Company Information

Aecon Group Inc.'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Aecon Group Inc.
  • Ticker: ARE
  • Exchange: TSX
  • Founded: 1877
  • Industry: Construction and Engineering
  • Sector: Capital Goods
  • Market Cap: CA$1.041b
  • Shares outstanding: 60.72m
  • Website: https://www.aecon.com

Number of Employees


Location

  • Aecon Group Inc.
  • 20 Carlson Court
  • Suite 800
  • Toronto
  • Ontario
  • M9W 7K6
  • Canada

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
ARETSX (The Toronto Stock Exchange)YesCommon SharesCACADJan 1988
2AEDB (Deutsche Boerse AG)YesCommon SharesDEEURJan 1988
AEGX.FOTCPK (Pink Sheets LLC)YesCommon SharesUSUSDJan 1988

Biography

Aecon Group Inc. provides construction and infrastructure development services to private and public sector clients in Canada, the United States, and internationally. It operates through three segments: Infrastructure, Industrial, and Concessions. The Infrastructure segment is involved in the construction of roads and bridges, and rail and transit systems, as well as in municipal road construction, asphalt production and aggregates, material engineering and design, and foundation activities. This segment also undertakes hydroelectric, tunnel, airport, marine, and civil transportation infrastructure projects; and constructs water treatment facilities and mechanical systems. The Industrial segment constructs steam assisted gravity drainage systems, turnkey well pad and field facilities, liquefied natural gas plants, and gas compression facilities, as well as nuclear, thermal and hydro, natural gas, and renewable power plants; and undertakes oil and gas pipeline construction and integrity program, telecom infrastructure, power transmission and distribution network, water and sewer construction, district energy, and high voltage transmission projects. This segment also offers locate, fabrication, modularization, field installation, and plant maintenance turnaround services; and mine site development services, such as overburden removal and piling, environmental reclamation, ore storage facilities, heavy mechanical work, and process installation services. The Concessions segment develops, finances, constructs, and operates infrastructure projects by way of build-operate-transfer, build-own-operate-transfer, and other public-private partnership contract structures, as well as offers private finance solutions. The company was formerly known as Prefac Concrete Co. Ltd. and changed its name to Aecon Group Inc. in June 2001. Aecon Group Inc. was founded in 1877 and is based in Toronto, Canada. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/25 23:36
End of Day Share Price2020/02/25 00:00
Earnings2019/09/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.