SNC Lavalin- the Trading Range of the Decade… Literally
SNC Lavalin is a multinational engineering and construction company listed under the symbol SNC on the TSX. We see this stock with long term hold potential, as well as an ideal swing trade where its trading right now.
SNC is in a trading range tighter than a university students wallet after paying tuition. Since 2008, the stock has gone nowhere. Since reaching its high in 2008 the stock has fallen only 7%. For the case for a swing trade, the stock is approaching a very well held support around $52, where it has bounced 6 times from around this level in the past 2 years before reaching at least $56 every single time. In technical sense, this is the perfect time to buy, on a retest of strong support. In the trading range, a good place to sell would be in our view around $57, for a $5/share profit for a swing with good defined risk and reward. If support breaks at $51, that would be the area we would put a stop at, to define your risk as $1. This also is because the next level of support after $51 area is around 36/ 37, a level from 2015 and 2016 in which it bounced from.
For the buy and holders SNC still holds appeal. The fundamentals of this company appear fairly strong. With a strong $15 billion dollar backlog, and increase revenue and EPS growth powered through their core infrastructure and oil and gas business as well as engineering through their Atkins acquisition. The company is a dividend grower, with a dividend at 2.2%, increasing for the past 17 years. The main attraction however is their capital assets, mainly the 407. These are assets which produce stable cash flows and have long lives, which add stability to earnings in a fairly lumpy construction industry. Their stake in the highway alone is estimated to be worth around 27.66 a share, while other capital assets valued at $2.97 a share. If any sort of activity is done to sell or spin out these assets, significant shareholder value could be created, and even if not, they are seeing some decent growth and long term stability. The core business of engineering and construction is being priced very cheaply when taking into consideration the value of these assets.
Whether your a swing trader or long term holder, we believe SNC has something appealing to both of you.
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