SNC-Lavalin Group Inc (TSX:SNC) is up around 30% in just the past month. After pleading guilty in its bribery case and coming away what will look to be just probation and a fine of $280 million, the stock got a big boost in its share price as a result of the news.
The last time the stock had closed above $30 was back at the beginning of May. Since then it would gone to plummet, falling below $16 as recently as September.
But now, with its legal problems potentially being resolved, it's one important distraction out of the way for SNC. However, the company still has a long way to go in proving that it's a viable, long-term investment.
The company has undergone many changes this year, including a reorganization that's involved changes in leadership and SNC shifting focus onto engineering and away from construction.
It's going to take a long time for investors to see the effects of its restructuring and whether it has worked or not. In two of its past four quarters, the company's operating income has been in the red.
SNC has also been burning through cash, with negative free cash flow totaling just under $900 million over the past 12 months and it's been negative in each of the past four quarters.
SNC may appear to be a cheap stock to buy today, trading at around 1.4 times its book value and just 0.6 times its sales, but there's still a lot of uncertainty in the company's operations and how it will perform. It may require buying the stock at a higher price, but the safe option for investors is to wait and see how well SNC is able to turn things around in 2020 before buying shares of the company.
