Friday’s TSX breakouts: This stock has 9 unanimous ‘buy’ calls and a consistent dividend

It has been a tumultuous week with equity markets vacillating, fueled by volatility in the price of oil. This morning, crude oil prices are down slightly.

With just one trading day left in the month, the S&P/TSX composite index appears likely closing out the month relatively flat. Before the market opened on September 30, the S&P/TSX composite index was up 1.07 per cent so far this month.

Quarter to date, the TSX index is up 4.91 per cent, and year to date is up 13.41 per cent.

On today's TSX Breakouts report, there are 44 securities on the positive breakouts list (stocks with positive price momentum), and 17 securities on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that appears on the positive breakouts list. The security highlighted today is Enerflex Ltd. (EFX-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Calgary-based Enerflex is a supplier of products and services to the oil and gas industry, providing natural gas compression, oil and gas processing, refrigeration systems and electric power systems.

After the market closed on August 4, the company reported second quarter financial results that topped the Street's expectations. Earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $44.86-million, above the consensus estimate of $40.5-million.

Of importance was the growth in bookings and backlog. Despite challenging industry conditions, the company reported an increase in bookings. Bookings increased by $68-million to $154-million compared to the same period last year, and by $89-million from the previous quarter. Backlog strengthened by $10.5-million to $345-million relative to the prior quarter.

Blair Goertzen, the president and chief executive officer, stated in the earnings release that, "Enerflex's second quarter financial results reflected the continuing uncertainty surrounding commodity prices and the associated reduction in customer capital budgets, which resulted in lower revenues. Against this backdrop, the Company has increased recurring rental revenues, improved project margins and increased bookings. Enerflex expects that these challenging conditions will continue through 2016. The Company remains focused on controlling costs, preserving the strength of its balance sheet and generating free cash flow, positioning it to weather this prolonged downturn. Enerflex will continue to deploy capital and pursue opportunities in those regions where there is economic growth, including the USA, Middle/East Africa and Latin America regions."

The share price rallied 12 per cent on high volume the following trading day with over 500,000 shares traded. This historical two-month average daily trading volume is just over 300,000 shares.

In early September, the company completed a bought deal financing, raising approximately $115-million through the issuance of over 8.9-million shares at a price of $12.85 per share. Management indicated that the funds may be used to fund its growth with potential acquisitions.

Dividend policy

The company pays its shareholders a quarterly dividend of 8.5 cents per share, or 34 cents on a yearly basis. This translates to a dividend yield of approximately 2.4 per cent. Despite the volatility in the price of oil, the company has managed maintained its dividend at this level since 2014, and has never cut its dividend.

Analysts' recommendations

This small-cap stock, with a market capitalization of $1.27-billion is well covered by the Street. According to Bloomberg, nine analysts have issued research reports since the start of the year, all of these analysts have 'buy' recommendations on the stock. These nine firms with analyst coverage include: Alta Corp Capital, BMO Capital Markets, CIBC World Markets, Industrial Alliance Securities, National Bank Securities, Peters & Co., Raymond James, Scotia Capital, and TD Securities.

The consensus EBITDA estimate is $167-million in 2016, rising 25 per cent to $208-million in 2017.

Analysts' forecasts have volatile, falling at the start of the year and then rising in recent months. For instance, at the beginning of the year, the EBITDA estimate was $193-million for 2016 and $203-million for 2017. At the start of July, the Street's forecasts dipped to $157-million for 2016 and $193-million for 2017 before recovering.

Valuation

The stock is trading at an enterprise value-to-EBITDA multiple of 7.9 times the consensus 2017 estimate. This is near the peak of its historical three-year trading range. Its historical three-year average multiple is 6.6 times.

The average one-year target price is $16.28, which implies upside potential of 13 per cent over the next 12 months. Target prices range from a low of $15 to a high of $18. Target prices provided by nine firms in numerical order are as follows: two at $15, two at $15.50, two at $16, $17.50, and two at $18.

Chart watch

Year to date, the share price is up 8 per cent with all of the gains realized in the past month.

In late-August, the share price experienced a bullish 'Golden Cross', this occurs when the 50-day moving average crosses above the 200-day moving average. Since the end of August, the share price has rallied 8 per cent.

There is upside initial overhead resistance at $16, and then at $18.

In terms of downside risk, there is initial support around $14, and then at $12.75, which is near its 50-day moving average (at $12.76). Failing that, there is support at $11.50, which is close to its 200-day moving average (at $11.56), and after that at $10.

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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indices that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.