SNC-LAVALIN GROUP INC. $38 - Toronto symbol SNC

SNC-LAVALIN GROUP INC. $38 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $5.7 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.snclavalin.com) is facing a class-action lawsuit over $56 million U.S. in unusual payments to agents it hired to secure certain construction contracts. The stock fell nearly 20% when the company disclosed these payments in March 2012. The news also prompted SNC’s chief executive officer to quit.

These payments are small next to the $378.8 million (Canadian), or $2.49 a share, that SNC earned in 2011. But even so, the lawsuit is seeking $1 billion in damages. However, lawsuits like this are difficult to prove. Moreover, it would probably take years for the case to come to court.

The matter has had little impact on SNC’s ability to win new contracts. For example, the B.C. government has selected a consortium headed by SNC to design and build an 11-kilometre light-rail rapid transit line near Vancouver.

This deal is worth $1.4 billion; SNC did not say what’s its share of the contract is worth. The new line should begin operating in 2016.

SNC-Lavalin is a buy.

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