Reviewing Stantec (NYSE:STN) and AECOM (NYSE:ACM)

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

Institutional and Insider Ownership

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

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 0.9%. 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 increased its dividend for 3 consecutive years and Stantec has increased its dividend for 13 consecutive years.

Analyst Ratings

This is a summary of recent ratings and price targets for AECOM and Stantec, as provided 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 currently has a consensus target price of $80.73, suggesting a potential upside of 14.22%. Stantec has a consensus target price of $175.00, suggesting a potential upside of 131.18%. Given Stantec’s stronger consensus rating and higher possible upside, analysts plainly believe Stantec is more favorable than AECOM.

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%

Valuation & Earnings

This table compares AECOM and Stantec”s top-line revenue, earnings per share (EPS) 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	32.42
Stantec	$5.83 billion	1.44	$343.11 million	$3.21	23.58

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.

Volatility and Risk

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