Financial Analysis: Stantec (NYSE:STN) vs. AECOM (NYSE:ACM)

AECOM (NYSE:ACM) and Stantec (NYSE:STN) are both mid-cap industrials companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, dividends, risk and earnings.

Dividends

AECOM pays an annual dividend of $1.24 per share and has a dividend yield of 1.8%. Stantec pays an annual dividend of $0.71 per share and has a dividend yield of 0.8%. AECOM pays out 56.9% of its earnings in the form of a dividend. Stantec pays out 22.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AECOM has raised its dividend for 3 consecutive years and Stantec has raised its dividend for 13 consecutive years.

Insider and Institutional Ownership

85.4% of AECOM shares are held by institutional investors. Comparatively, 63.9% of Stantec shares are held by institutional investors. 0.5% of AECOM shares are held by company insiders. Comparatively, 0.5% of Stantec shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares AECOM and Stantec’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AECOM	1.87%	19.72%	4.10%
Stantec	5.91%	19.70%	8.07%

Earnings & Valuation

This table compares AECOM and Stantec”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AECOM	$16.14 billion	0.56	$561.77 million	$2.18	32.29
Stantec	$5.83 billion	1.64	$343.11 million	$3.21	27.12

AECOM has higher revenue and earnings than Stantec. Stantec is trading at a lower price-to-earnings ratio than AECOM, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and price targets for AECOM and Stantec, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AECOM	1	3	8	0	2.58
Stantec	0	2	5	0	2.71

AECOM presently has a consensus target price of $80.73, suggesting a potential upside of 14.68%. Stantec has a consensus target price of $175.00, suggesting a potential upside of 101.05%. Given Stantec’s stronger consensus rating and higher probable upside, analysts clearly believe Stantec is more favorable than AECOM.

Volatility & Risk

AECOM has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500. Comparatively, Stantec has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500.

Summary

Stantec beats AECOM on 9 of the 16 factors compared between the two stocks.

About AECOM

AECOM is an infrastructure consulting firm that provides planning, design, engineering, architecture, program management, and environmental services. It works with public- and private-sector clients on projects involving transportation, water, buildings, energy, and other infrastructure. The company supports projects across their life cycles, from early planning and design through construction management and operations. Its services include environmental assessment and remediation, engineering and technical consulting, and management of large-scale infrastructure programs.

About Stantec

Stantec is a global professional services firm that provides engineering, architecture, environmental consulting, and related services. Its work supports the planning, design, and delivery of projects in areas including water, transportation, buildings, energy, and community development. Founded in Edmonton, Alberta, in 1954 as D.R. Stanley Associates, the company later adopted the Stantec name. It is headquartered in Edmonton and serves public- and private-sector clients across North America and in international markets.