Today, in terms of earnings releases for Canadian stocks, eleven companies in the S&P/TSX composite index are scheduled to report their quarterly results.
They are: Aecon Group Inc. (ARE-T), Alaris Royalty Corp. (AD-T), Baytex Energy Corp. (BTE-T), DH Corp. (DH-T), Endeavour Mining Corp. (EDV-T), ECN Capital Corp. (ECN-T), Enercare Inc. (ECI-T), Gibson Energy Inc. (GEI-T), Great Canadian Gaming Corp. (GC-T), Tourmaline Oil Corp. (TOU-T), and Whitecap Resources Inc. (WCP-T).
Briefly recapping Monday's stock market returns, U.S. equity markets closed with losses, while the Canadian benchmark ended the trading session with a minimal gain.
In the U.S., the Dow Jones Industrial Average declined 0.24 per cent, the S&P 500 index fell 0.33 per cent, and Nasdaq composite index lost 0.37 per cent.
Turning to Canada, the S&P/TSX composite index increased 21 points, or 0.14 per cent. Energy stocks rebounded as the price of natural gas rallied 2.6 per cent. There were 106 securities in the TSX Index that advanced, 139 securities declined in value, and four stocks closed the day unchanged.
The TSX Index is up 2.24 per cent year-to-date.
On today's TSX Breakouts report, there are 27 stocks on the positive breakouts list (stocks with positive price momentum), and 30 stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today may appear on the positive breakouts list in the future if analysts are correct. The stock has an unanimous 'buy' recommendation with analysts anticipating the share price may rally anywhere between 15 per cent and 31 per cent over the next year. The company is Magellan Aerospace Corp. (MAL–T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Mississauga-based Magellan Aerospace is a global supplier of products serving the aerospace industry, military and space markets, and the industrial power generation market.
On Nov. 14, the company reported third-quarter financial results that fell short of expectations. Earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $38.4-million, up 1.7 per cent year-over-year, just below the consensus estimate of $40.4-million. Reported earnings per share (EPS) was 32 cents, unchanged from the same period last year, and a penny shy of expectations. The share price declined 4.7 per cent that trading day, but recovered the following week.
The company is anticipated to report its fourth-quarter financial results later this month.
Dividend policy
The company pays its shareholders a quarterly dividend of 6.5 cent per share, or 26 cents per share on a yearly basis. This translates to an annualized dividend yield of 1.4 per cent.
Management is firmly committed to its dividend policy. The company has raised its dividend four times since it was initiated in 2013. The most recent increase was announced a few months ago. In November, the company announced a 13 per cent dividend increase, raising the dividend to its current level of 6.5 cents per share from 5.75 cents per share.
Financial forecasts
The Street is forecasting EBITDA of $173-million in 2016, rising to $183-million in 2017, and to $199-million the following year. The consensus EPS estimates are $1.50 in 2016, rising to $1.63 in 2017, and to $1.83 in 2018.
Earnings revisions have been minor, with a slight downward bias. For instance, six months ago, the consensus EBITDA estimates were $177-million for 2016 and $184-million for 2017. The consensus EPS estimates were $1.56 for 2016 and $1.68 for 2017.
Valuation
The stock is trading at a slight discount to its historical average. According to Bloomberg, shares of Magellan are trading at an enterprise value-to-EBITDA multiple of 5.9 times the 2018 consensus estimate compared to the three-year historical average multiple of 6.3 times. Over the past three years, the stock has traded at a peak forward multiple of over 7.5 times.
Analysts' target prices range from a low of $21.00 (at Canaccord Genuity) to a high of $24.00 (at Paradigm Capital as well as TD Securities), implying the share price has upside potential of between 15 per cent and 31 per cent over the next year.
Analysts' recommendations
This small cap stock, with a market capitalization of $1.06-billion, has reasonable research coverage from the Street. Since November, three analysts have issued research reports on the company, with all three analysts having a "buy" recommendation on the stock.
The three firms providing recent research coverage are as follows in alphabetical order: Canaccord Genuity, Paradigm Capital, and TD Securities.
Revised target prices
Last month, Timothy James, the analyst at TD Securities, increased his target price to $24.00 from $23.00.
Insider Transaction Activity
Looking back over the past six months, there has not be any insider transaction activity.
Chart Watch
The stock has delivered solid long-term performance. Over the past four years, the share price has soared over 400 per cent, rising to $18.29 from $3.22. However, this momentum has stalled. Since mid-2015, the share price has been range bound, trading mainly between $15 and $20.
In terms of key resistance and support levels, the stock price has initial overhead resistance just below $20 and initial downside support exists around $17, just below its 50-day moving average (at $17.83) and its 200-day moving average (at $17.66). There is strong support around the $15 level.
The stock can be thinly traded. The three-month daily average trading volume is approximately 50,000 shares.
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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 indexes 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.