This company is a real bargain! A classic Peter Lynch turnaround.

Here are the positives at a glance.

  • A P/E ratio of 4.7
  • A 5-year earnings growth rate of 50%
  • A PEG ratio of 0.09
  • $5.75/share in cash
  • A Debt/Equity ratio of 26%
  • A dividend of 2.5%

SNC Lavalin is a global engineering firm that has been in business since 1911. It’s headquartered in Montreal, Canada.

It has had some bad press in recent years. In 2011, a few of its executives, including the CEO, were caught in a bribery scandal. The police are still investigating the case. The company itself has been charged. They are pleading not guilty.

Naturally, SNC Lavalin has seen it’s stock price decline in the years since. At the moment it’s sitting at about $40/share and has a P/E ratio of 4.7.

SNC Lavalin stock chart

The company has made every effort to clean up its internal management and its reputation. It fired the CEO and the executives caught in the scandal. It hired a new CEO, Robert Card, who has a squeaky clean reputation and has helped restore its tarnished reputation.

It sold a subsidiary, Altalink, for $3.2 billion. It used some of the cash to pay off debt and purchase a rival firm, Kentz, that has higher margins and increases SNC Lavalin’s exposure to oil and gas projects.

It continues to get projects despite the scandal. Just recently it was awarded a contract in Dubai as well as two other middle east oil projects that have a combined value of $500 million.

There is a concern that the company will lose its battle over the scandal and be barred from bidding on contracts within its home country of Canada for up to 5 years. However, this punishment is at the discretion of the Canadian government and its believed that since this is an election year the Canadian government will forgo that option so as not to dissuade the always important French-Canadian vote.

Despite the potential loss of Canadian contracts, the company is still in demand around the world for its expertise in large industrial engineering projects.

The company has $5.75 /share in cash. If you subtract that from the price/share you get a piece of the company for $34.25/share. Divide that by its EPS of 8.73 and you get true P/E ratio of just 3.9. The already low PEG ratio of 0.09 gets bumped down to an even more attractive 0.07.

SNC Lavalin, a turnaround with growth potential.