Stantec (TSX:STN) Valuation in Focus After Strong Q2 Results and Raised Growth Outlook

If you have been watching Stantec (TSX:STN) lately, you might have noticed the stock attracting extra attention following its second quarter results. The company reported stronger year-over-year sales, revenue, and net income, and paired these numbers with an increase in full-year revenue growth guidance. While Stantec confirmed no recent buyback activity, the message was clear: business momentum is picking up, and management is comfortable enough to publicly raise their outlook for 2025.

Reviewing the stock’s progress, Stantec has climbed an impressive 36% over the past year, including a gain of nearly 7% over the past three months. Growth in both revenue and net income over the last 12 months has kept the company in the spotlight, even as other capital goods names have struggled to sustain investor interest. While last quarter’s dividend affirmation was steady, the main story has been earnings and revised guidance, both of which have supported improving sentiment around the stock.

After a significant run such as this, the real question becomes whether Stantec’s valuation still offers potential for further gains, or if the market is already anticipating and reflecting even greater future growth.

Most Popular Narrative: 5.6% Undervalued

According to community narrative, Stantec is currently trading modestly below its estimated fair value, with future growth assumptions and profitability improvements forming the foundation of this outlook. Analysts have identified robust catalysts that could drive the company’s valuation higher, reflecting a combination of global expansion, digital transformation, and policy support.

Demand for infrastructure upgrades, water and wastewater treatment, energy transition, and climate adaptation projects remains exceptionally strong globally. The company reports double-digit organic growth and a $7.9 billion backlog, positioning Stantec for sustained revenue expansion that aligns with long-term trends such as urbanization and aging infrastructure.

Interested in understanding the financial engine pushing Stantec above analyst targets? Explore the narrative built on ambitious projections. If you think you are aware of what is driving this valuation, consider a closer look. The scenario assumes aggressive profit gains and expectations not commonly seen in this sector. Curious about which forecasted metrics could influence this outlook? The details behind this price target may offer new insights.

Result: Fair Value of $162.36 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing integration from recent acquisitions and the threat of labor shortages could challenge Stantec’s growth projections and put pressure on future margins.

Find out about the key risks to this Stantec narrative.

Another View: Our DCF Model Offers a Different Take

While analyst targets reflect optimism based on future earnings growth, our DCF model provides a more cautious outlook. It suggests the shares could be trading above their estimated fair value. Which approach aligns with your perspective?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Stantec for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Stantec Narrative

If you have a different perspective or would like to dig deeper into the figures, crafting your own outlook is quick and straightforward. Just do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Stantec.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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