> SNC-Lavalin: Buy or Sell?

SNC-Lavalin: Buy or Sell?

Posted on Tuesday, October 23, 2012 | No Comments

Hi all,

After some thorough analysis on SNC-Lavalin, I came to a few conclusions. If you noticed, they had a new CEO October 1st, 2012. Interestingly enough, after this date, the stock price began to rise gradually again. Actually, they've been going up finally instead of dropping significantly. The 52-week high is $55 or so, so I believe the stock still has a lot of room for growth.

You can see this >here<.

Moreover, SNC-Lavalin is winning quite a significant amount of contracts, in which their revenues should continue to experience respectable growth. The problem with the company is not cash flows or revenues though, it is their expenses. Due to the previous CEO and other key executives cooking the books and breaching the code of ethics in various foreign countries, this has put a lot of undue stress unto the company in forms of expenses to various stakeholders and also contingent liabilities. In fact, they have a contingent liability of $1.5B from a class-action lawsuit from stakeholders. More than likely this won't go through, the company seems to be doing all it can regarding getting back on track and so forth, and it is a solid company in general.

In case you're interested, here are the remedial measures the company has been doing to get back on its feet:
1) Management override policy (specific procedures if management does unethical things/tries to force certain things)
2) Code of ethics amended (whistleblowing encouraged)
3) New financial management solution in individual business units

Note: this is taken directly from the MD&A, rewritten a bit in simpler more concise terms

The stock price should be going anywhere but down. They have a new CEO, new policies, and a solid foundation for a company. I am sure shareholders are wide aware that such a scandal will very likely never be happening again. Things are looking optimistic.

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