There are no Canadian economic releases today.
In the U.S., it is a busy day with data such as fourth-quarter gross domestic product (GDP), December durable goods orders and the January index of consumer sentiment to be released.
There are no companies in the S&P/TSX composite index scheduled to report earnings results today.
This morning, key commodity prices are under pressure. The prices of oil and gold are down mildly, while the price of natural gas is down sharply, by over 3 per cent.
Briefly recapping Thursday's performance, major North American equity markets closed with minor moves. However, it was encouraging to see stock markets retain their recent gains.
In the U.S., the Dow Jones Industrial Average gained 0.16 per cent, the S&P 500 index lost 0.07 per cent, and Nasdaq composite index declined 0.02 per cent.
Turning to Canada, the S&P/TSX composite index lost 28 points, or 0.18 per cent. There were 78 securities in the TSX Index that advanced, 170 securities declined in value, and one stock closed the day unchanged.
Month-to-date, the TSX Index is up 2.15 per cent.
On today's TSX Breakouts report, there are 46 stocks on the positive breakouts list (stocks with positive price momentum), and 10 securities on the negative breakouts list (stocks with negative price momentum).
The security highlighted today appears on the positive breakouts list – The Bank of Nova Scotia (BNS-T). Most of the 'Big 6' banks are on the positive breakouts list.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Bank of Nova Scotia (also referred to as Scotiabank) is a Canadian bank with international operations. The bank provides financial services across North America, Latin America, the Caribbean and Central America, as well as in Asia.
Before the market opened on Nov. 29, the company reported better-than-expected fourth quarter fiscal 2016 financial results. The company reported adjusted earnings per share (EPS) of $1.58, exceeding the consensus EPS estimate of $1.52.
Book value per share was $43.59. The common equity tier 1 capital ratio was 11 per cent as at Oct. 31. For fiscal 2016, adjusted return on equity was 14.3 per cent, down from 14.6 per cent reported in fiscal 2015.
Shares are dual-listed, trading on the Toronto Stock Exchange and the New York Stock Exchange under the same ticker, BNS.
Dividend policy
The company pays shareholders a quarterly dividend of 74 cents per share or $2.96 on a yearly basis. This equates to an annualized dividend yield of 3.8 per cent.
The company may announce a dividend hike when it reports its first-quarter fiscal 2017 results. Management has consistently announced a dividend increase in March of every year since 2011.
Valuation
According to Bloomberg, the stock is trading at a price-to-earnings (P/E) multiple of 11.5 times the 2018 consensus estimate. Over the past decade, the stock has traded at an average forward P/E multiple of 10.9 times, and traded largely between 10 times and 12 times forward earnings.
Analysts have target prices that range from a low of $66 to a high of $90. Individual target prices supplied by 16 firms are as follows in numerical order: $66, $68, $75, two at $77, $78, two at $80, $81, $82, $84, $84.40, $86, two at $88, and $90. The consensus one-year target price is $80.29, suggesting the shares are almost fully valued, with just 2 per cent upside potential over the next 12 months.
Analysts' recommendations
According to Bloomberg, 19 analysts cover the stock, nine analysts have 'buy' recommendations, nine analysts have 'hold' recommendations, and one analyst (from Veritas Investment Research) has a 'sell' recommendation.
Recent analysts' revisions
This month, the stock has experienced a number of positive target price revisions. For instance, earlier this week, Sumit Malhotra, the analyst from Scotia Capital, increased the target price to $90 from $84 while maintaining an 'outperform' recommendation on the stock. Earlier this month, Mario Mendonca, the analyst from TD Securities, tweaked his target price higher to $88 from $87 while maintaining his 'action list buy' recommendation on the stock. In addition, Meny Grauman, the analyst from Cormark Securities, lifted the target price on the stock to $88 from $82. The analyst from Credit Suisse, Nick Stogdill, bumped his target price up to $80 from $78, and analyst Gabriel Dechaine of Canaccord Genuity increased his target price to $84 from $80. Lastly, Richard Bove, from Rafferty Capital Markets raised his target price to $84.40 from $80.45.
Financial forecasts
The consensus earnings per share estimates are $6.39 for fiscal 2017, rising 7 per cent to $6.86 for fiscal 2018.
Earnings forecasts have been risings. For instance, on July 1, the consensus EPS was $6.20 for fiscal 2017.
Peer comparisons
For the Bank of Montreal (BMO-T), the Street is forecasting earnings of $7.74 in fiscal 2017 rising over 6 per cent to $8.24 in fiscal 2018. The stock is trading at a P/E multiple of 12.2 times the 2018 consensus estimate. The 12-month consensus target price is $97.96, implying the stock is fully valued.
For CIBC (CM-T), the Street is forecasting earnings of $10.26 in fiscal 2017 rising 5 per cent to $10.77 in fiscal 2018. The stock is trading at a P/E multiple of 10.5 times the 2018 consensus estimate. The 12-month consensus target price is $114.43, implying the stock is fully valued with just 1 per cent upside potential.
For National Bank of Canada (NA-T), the Street is forecasting earnings of $5.01 in fiscal 2017 rising over 7 per cent to $5.37 in fiscal 2018. The stock is trading at a P/E multiple of 10.5 times the 2018 consensus estimate. The 12-month consensus target price is $56.08, implying the stock is fully valued.
For Royal Bank of Canada (RY-T), the Street is forecasting earnings of $7.15 in fiscal 2017 rising over 5 per cent to $7.56 in fiscal 2018. The stock is trading at a P/E multiple of 12.5 times the 2018 consensus estimate. The 12-month consensus target price is $93.99, implying the stock is fully valued.
For TD Bank (TD-T), the Street is forecasting earnings of $5.16 in fiscal 2017 rising over 7 per cent to $5.55 in fiscal 2018. The stock is trading at a P/E multiple of 12.3 times the 2018 consensus estimate. The 12-month consensus target price is $68.39, implying the stock is fully valued.
Notable insider transaction activities
On Jan. 9, Brian Porter, the chief executive officer, purchased 7,000 shares at a price of $76.2887 per share.
Chart watch
Year to date, the share price has rallied 5 per cent.
On Thursday, the stock price closed at a record high. However, volume was weak with approximately 1.85-million shares traded, below the two-month historical daily average trading volume of 3.28-million shares.
In terms of key resistance and support levels, the share price is approaching initial overhead resistance around $80. Meanwhile, there is initial downside support around $75, close to its 50-day moving average (at $75.44).
The relative strength index is at 68, suggesting the shares are approaching overbought territory. Generally, a reading at or above 70 indicates an overbought condition.
===
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.