On today's TSX Breakouts report, there are 18 stocks on the positive breakouts list (stocks with positive price momentum), and 43 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a company that recently appeared on the positive breakouts list. The stock was last featured in the Breakouts report in January and since then, the share price has rallied over 20 per cent. When you find a stock that is outperforming, whose share price is being driven higher due to solid fundamentals, you hold on to the stock and enjoy the ride higher. This stock falls into that category of outperformers - Quebecor Inc. (QBR.B-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Quebec-based Quebecor Inc. is a telecommunications and media holding company with an 81.5-per-cent interest in Quebecor Media Inc. Quebecor has three key business segments: telecommunications with its core asset, Videotron Ltd.; the media segment, with the television broadcaster, TVA Group; and its smallest segment, sports and entertainment.
Before the market opened on Aug. 10, the company reported better-than-expected second quarter financial results that sent the share price rising over 4 per cent on high volume that day, and rising by nearly 3 per cent the following day to close at a record high. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $395-million, handily beating the Street's expectations of $382-million. Adjusted earnings per share came in at 69 cents, surpassing the consensus estimate of 63 cents. Revenues topped $1-billion, rising 4 per cent year-over-year. The telecommunications segment, Quebecor's largest business segment, saw its top line expand by 5.1 per cent year-over-year to $820.1-million. Subscriber additions amounted to 32,400. Wireless average monthly revenue per user (ARPU) increased 6 per cent year-over-year to $53.32. The company was active in its share buyback program, repurchasing 391,000 shares during the quarter.
Dividend policy
The company pays its shareholders a quarterly dividend of 5.5 cents per share, or 22 cents on a yearly basis. This equates to an annualized dividend yield of 0.5 per cent. Since 2015, management has announced a dividend increase once a year, in May.
Analysts' recommendations
There are 15 analysts providing recent research coverage on this company of which 14 analysts have buy recommendations and one analyst (from Morningstar) has a 'hold' recommendation.
The 15 firms providing research coverage are as follows in alphabetical order: Accountability Research, Barclays, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Cormark Securities, Desjardins Securities, Echelon Wealth Partners, Macquarie, Morningstar, National Bank Financial, RBC Capital Markets, Scotia Capital, TD Securities and Veritas Investment Research.
Financial forecasts
The consensus EBITDA estimate is $1.58-billion in 2017, expanding to $1.66-billion in 2018. The Street is forecasting earnings per share of $2.83 in 2017, rising 11 per cent to $3.14 in 2018.
Earnings estimates have been revised higher in recent months. For instance, three months ago, the Street was forecasting EBITDA of $1.56-billion for 2017 and $1.64-billion for 2018. The consensus earnings per share estimates were $2.64 for 2017 and $2.96 for 2018.
Valuation
Analysts commonly value the stock using a net asset value approach. According to Bloomberg, the one-year consensus target price is $51.07, suggesting there is 10 per cent upside in the share price over the next 12 months. Target prices provided by 14 firms range from a low of $47 to a high of $55. Individual target prices are as follows in numerical order: two at $47, $48, $49, two at $50, two at $51, three at $52, two at $54, $55.
Revised recommendations
Earlier this month, most analysts revised their target prices – all higher.
Robert Bek from CIBC World Markets increased his target price to $47 from $43. Tim Casey from BMO Capital Markets took his target price up to $50 from $47.50. Drew McReynolds from RBC Capital Markets raised his target price to $49 from $46. Vince Valentini from TD Securities raised his target price to $54 from $53. Adam Shine from National Bank Financial hiked his target price to $52 from $48. Greg MacDonald, the analyst from Macquarie, increased his target price by $6 to $55 (the high on the Street). Jeffrey Fan from Scotia Capital lifted his target price by $1 to $54. Aravinda Galappatthige from Canaccord Genuity took his target price up to an even $50 from $47. Robert Goff from Echelon Wealth Partners took his target price up to $52 from $50. Desmond Lau from Veritas Investment Research bumped his target price up by $2 to $47. David Donovan from Accountability Research lifted his target price to $51 from $45. Phillip Huang from Barclays took his target price up by $2 to $51.
Insider transaction activities
Year-to-date, there have been no reported transactions by insiders.
Chart watch
Year-to-date, the share price is up an impressive 24 per cent, making it one of the top performing consumer discretionary stocks in the S&P/TSX composite index.
The stock remains in an uptrend, although, in the near-term, the share price may be due for a pause in order to digest its recent gains.
The stock is in overbought territory with a relative strength index reading of 74. Generally, a reading at or above 70 indicates an overbought condition.
In terms of key support and resistance levels, there is initial downside support around $43, near its 50-day moving average (at $43.01). Failing that, there is support around $40, close to its 200-day moving average (at $40.01). The stock has overhead resistance around $50.
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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, financial forecasts, 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.
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