It's not every day you see an analyst raising his or her target price on a stock because they feel the stock deserves a higher multiple - at least, not in today's market. However, Anthony Zicha, an analyst at Scotia Capital, has done just that with Stantec Inc. , a diversified engineering firm that stands to benefit from rising stimulus spending.
The company reported earnings of 45 cents a share in the first quarter, above the consensus expectation for 43 cents a share. As a result, he believes the shares should trade at 14-times estimated 2010 earnings, up from an earlier multiple of 12-times earnings. The shares are currently trading at 11.6-times 2010 estimated earnings. He raised his target price on the shares to $32 from $28 previously.
"We believe a higher multiple is justified given: (1) the stability of Stantec's revenues, and (2) the potential boost to business in 2010 as a result of North American stimulus packages," Mr. Zicha said in a note.
The move comes as a number of other analysts raised their target prices on Stantec this week, while maintaining either "market perform" or "sector perform" recommendations. BMO Nesbitt Burns raised their target to $29 from $25. CIBC World Markets raised their target to $28 from $24. And Cormark Securities raised their target to $30 from $28.
David Berman