WSP Global (TSX:WSP) just secured a contract as a transmission delivery partner for American Electric Power, tying the engineering group to AEP’s planned $37b grid investment program over the next five years.
WSP Global’s recent contract win comes at a time when momentum in the share price is trying to rebuild. The CA$187.4 share price follows a 30 day share price return of 9.24% and a 90 day share price return of 9.42%. However, the year to date share price return is still down 25.06% and the 1 year total shareholder return has declined 30.65%, leaving longer term investors with a 5 year total shareholder return of 14.14%.
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The contract win and recent rebound put WSP Global in an awkward middle ground. Is a CA$187.4 share price cheap against fair value estimates that sit materially higher, or is it already baking in most of the upside?
Most Popular Narrative: 34% Undervalued
At the CA$187.4 close, the most followed valuation narrative for WSP Global points to a fair value of about CA$283.57. This frames today’s price as a material discount and links that gap to execution in power, grid and nuclear work.
The main factor that has to go right is that WSP Global successfully executes on its integrated, higher-margin Power & Energy and nuclear programs, including the ramp of TRC and POWER Engineers, as well as the more than 25 reactor projects and major grid clients it now serves.
See why 61 investors see WSP Global as 34% undervalued.
Result: Fair Value of CA$283.57 (UNDERVALUED)
Still, the bullish script on WSP Global unravels quickly if the CA$20.1b backlog converts more slowly than expected or if Power & Energy margins slip from recent levels.
Find out about the key risks to this WSP Global narrative.
Next Steps
Mixed messages in the WSP Global story so far. Consider your options while sentiment is split and weigh the full picture of 5 key rewards and 1 important warning sign.
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