SNC-Lavalin Group (SNC:TSE) Fundamental Valuation Report


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SNC-Lavalin Group $57.25 (CAD) Close Price as of 23/02/2018

Based on the analysis conducted in this report, SNC-Lavalin Group, (SNC:TSE) is found to be  Undervalued.

Company SNC-Lavalin Group
Symbol:Exchange SNC:TSE
Industry Industrials:Engineering & Construction
Close Price/Date $57.25 (CAD) 23/02/2018
Weighted Average Valuation $73.06 (CAD)
Summary SNC:TSE is found to be  Undervalued by 27.6% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $69.95 (CAD)
(in order of importance) Comparables: $82.96 (CAD)
Adjusted Book Value: $62.58 (CAD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Undervalued on an Asset Valuation basis

Valuation Details

SNC-Lavalin Group Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for SNC:TSE

Using a discounted cash flow model we generated an intrinsic value of $0.58 (CAD) for SNC:TSE

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

SNC:TSE Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $0.58 1% 5% 1% 5%
WACC (or Ke) 7.44 $2.61 ($0.76)
Terminal Growth Rate 2.40 ($0.95) $2.86
Tax Rate 0.21 $3.69 ($2.54)
Cash Flow 1,108,200,474 ($4.01) $5.17
Capital Expenditures -700,651,200 ($2.12) $3.28
Long Term Debt 828,545,000 $0.81 $0.34

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $82.96 (CAD) for SNC:TSE. We also generated a valuation of $85.68 (CAD) using other metrics and comparables.
The comparable companies were Stantec (STN:TSE) and WSP Global (WSP:TSE)

Company SNC:TSE End Date Value
Earnings/Share $2.34 (CAD)
Book Value/Share $29.77 (CAD)
Sales/Share $57.26 (CAD)
Cash Flow/Share ($1.45) (CAD)
EBITDA/Share $4.98 (CAD)
Price Based on Comps Adjustment Factor (%)
$73.76 (CAD) 42.7
$59.66 (CAD) 73.2
$45.97 (CAD) 44.7
$0.00 (CAD) -11.7
$38.63 (CAD) 46.8
SNC:TSE Ratios Used Average Values STN:TSE WSP:TSE
24.47 PE Ratio 31.52 37.66 25.39
1.92 PB Ratio 2.00 1.92 2.08
1.00 PS Ratio 0.80 0.71 0.89
0.00 PCF Ratio 15.16 13.88 16.44
14.81 EV to EBITDA 11.61 9.69 13.54

Multiples

Using a multiples approach we generated a valuation of  $53.76 (CAD) for SNC:TSE

Company SNC:TSE End Date Value
Earnings/Share $2.34 (CAD)
Book Value/Share $29.77 (CAD)
Sales/Share $57.26 (CAD)
Cash Flow/Share ($1.45) (CAD)
EBITDA/Share $4.98 (CAD)
Price Based on Comps Adjustment Factor
$45.03 (CAD) 0
$59.85 (CAD) 0
$50.20 (CAD) 0
$0.00 (CAD) 0
$59.97 (CAD) 0
Ratios Ratio Average
PE Ratio 19.24
PB Ratio 2.01
PS Ratio 0.88
PCF Ratio 58.18
EV to EBITDA 12.04

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  SNC:TSE for the last 10 years was  2.10

We ran the Adjusted Book Value for  SNC:TSE and generated a book value of  $29.77 (CAD)
By multiplying these we get an adjusted valuation of  $62.58 (CAD)

Analyst Data

In the Stockcalc database there are 10 analysts that provide a valuation for SNC:TSE. The 10 analysts have a concensus valuation for SNC:TSE for 2018 of $69.95 (CAD).

SNC:TSE SNC-Lavalin Group

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
6 1 0 4.5000 Outperform 2018-2-22

Current Price: not available

Analyst Consensus
CAD Millions 2018 2019 2020
Mean EPS 3.73 4.16 4.81
# EPS Analysts 10 7 1
Mean Revenue 11,384.60 11,999.40 12,439.00
# Revenue Analysts 10 7 1
Mean Target Price 69.95
Mean Cash Flow 4.04 4.59
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure

Company Overview (SNC:TSE CAD)

Price 57.25
Range 56.26 – 58.16
52 week 50.57 – 58.98
Open 56.29
Vol / Avg. 1.02M/317961
Mkt cap 10.05B
P/E 24.47
Div/yield 1.15/0.02
EPS 2.34
Shares 175.46M
Beta 1.16
Summary chart

Detailed Company Description

SNC-Lavalin Group Inc is a global engineering and construction company offering engineering, construction and commissioning services in international markets. It serves the oil and gas, mining and metallurgy, infrastructure, and power sectors.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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