Tuesday’s TSX breakouts: Stocks in this industry continue to soar

On Monday, major North American markets posted minor losses.

In the U.S., the Dow Jones Industrial Average fell 0.3 per cent, as did the S&P 500 Index, and the Nasdaq composite index declined 0.2 per cent.

In Canada, the S&P/TSX composite index dropped 37 points, or 0.25 per cent, to close at 14,689. There were 89 securities that advanced, 156 stocks declined in value, and one stock was unchanged.

On today's TSX Breakouts report, there are 32 securities on the positive breakouts list (stocks with positive price momentum), matched by an equal number of stocks on the negative breakouts list (stocks with negative price momentum). Oil and gas related stocks dominate the positive breakouts list, with 17 of the 32 stocks from the energy sector given the strengthening price of oil.

This stock highlighted today is one which analysts forecast will deliver solid revenue growth - Canopy Growth Corp. (CGC-T).

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

The company

Canopy Growth is a marijuana producer.

Management is focused on growth and expanding its production capacity. In August, the company completed a bought deal financing, issuing 9,453,000 shares at a price of $3.65 per share, raising $34.5-million.

Dividend policy

The company does not pay shareholders a dividend.

Analysts' recommendations

According to Bloomberg, there are four 'buy' recommendations. The stock has analyst coverage from the following firms: Dundee Securities, GMP, M Partners, and PI Financial Corp. The average one-year target price is $5.39, suggesting there is 27 per cent upside potential over the next 12 months. Individual target prices in numerical order are as follows: $4.75, $5, $5.80, and $6.

The consensus revenue estimate is $39-million in fiscal 2017, and forecast to rise to $69-million in fiscal 2018. The consensus earnings before interest, taxes, depreciation and amortization (EBITDA) is negative for fiscal 2017, and nearly $13-million for the following fiscal year. The company is anticipated to be profitable, reporting positive earnings per share, by fiscal 2018.

Forecasts have been rising in recent months. For instance, on June 26, the day before the company reported its 2016 fiscal year end financial results, the consensus revenue estimates were $22.6-million for fiscal 2017 and $29.4-million for fiscal 2018.

Insider transaction activity

Bruce Linton, the chairman and chief executive officer, sold 250,000 shares on June 29, and sold 150,000 shares the following day. This information can be found on the website www.sedi.ca.

Chart watch

Over the past couple of months, the share price has been trading sideways, principally in a range between $3.70 and $4.10, as the stock digests its recent strong gains. Year to date, this healthcare stock is up 43 per cent. Other stocks in this space has also realized stellar returns year-to-date. For instance, shares of Aphria Inc. (APH-X) are up 171 per cent, shares of Mettrum Health Corp. (MT-X) are up 92 per cent, and shares of OrganiGram Holdings Inc. (OGI-X) are up 102 per cent.

On Monday, the share price broke above its prior record closing high of $4.15, set on August 10. The stock price rose nearly 5 per cent on high volume with over 2-million shares trading. This is above its historical three-month daily trading volume average of approximately 1.6-million shares.

Should the share price pullback, there is support between $3.70 and $3.80, which is close to its 50-day moving average (at $3.81). Failing that, there is support at $3.50.

===

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.