High p/e Adds to SNC’s Risk

Article Excerpt

SNC-LAVALIN GROUP INC. $31 (Toronto symbol SNC; SI Rating: Average) earned $0.29 a share in the fourth quarter of 2005, up 45.0% from $0.20 a year earlier (all per-share amounts adjusted for a recent 3-for-1 stock split). If you exclude losses from its 16.77% stake Highway 407, a toll highway north of Toronto, per share earnings grew 20.8%. Revenue rose 9.1%, to $1.2 billion from $1.1 billion. SNC’s order backlog at the end of 2005 grew to $8.1 billion from $6.3 billion at the end of 2004. The strong results let SNC raise its quarterly dividend 31.3%, from $0.533 a share to $0.07. The new annual rate of $0.28 yields 0.9%. The stock has jumped five-fold in the last five years. But its high p/e of 33 exposes it to a sudden drop if the company reports a quarter of weak earnings. SNC-Lavalin is a hold. hold…

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