Friday’s TSX breakouts: This dividend stock’s earnings beat the Street

There are just 5 stocks on the positive breakouts list, and 38 stocks on the negative breakouts list. Of note, is that four of the five stocks on the positive breakout list are from the TSX Small Cap Index. Furthermore, two of the five stocks are from the technology sector. Discussed today is one of these technology stocks, Evertz Technologies Ltd. (ET-T).

Evertz designs, manufactures, and sells video and audio equipment to the television broadcast industry. Last quarter, 61 per cent of the company's revenues were from Canada and the United States, with the balance, 39 per cent, from international markets. The stock has a market capitalization of $1.2-billion.

After the close on Dec. 2, the company reported second-quarter fiscal 2016 earnings ahead of the Street's expectations. Revenue climbed 21 per cent year-over-year to a record $100.6-million, driven higher by new technologies and products. Gross margins were 57 per cent, up from 56 per cent a year ago. Earnings per share jumped 37 per cent year-over-year to 26 cents, exceeding the consensus estimate of 23 cents. On December 3, the stock price advanced 4 per cent, while the TSX slumped 1 per cent.

The company has a solid balance sheet with over $97.5-million of cash, or over a dollar per share.

Valuation

The stock trades at a price-to-earnings (p/e) multiple of 16 times the consensus 2017 earnings estimate. This is slightly above its one-year historical average of 15.2 times, and its three-year historical average of 15.4 times.

Analysts' recommendations

According to Bloomberg, there are four analysts with "buy" recommendations with an average one-year price target of $19.75, implying a potential price return of over 14 per cent. The price targets are as follows: $18.50, $19, $19.50 and $22.

The consensus earnings per share estimates is 98 cents in 2016, rising 9 per cent to $1.08 in 2017.

Dividend policy

The company pays shareholders a quarterly dividend of 18 cents per share, or 72 cents per annum, equating to an annualized yield of 4.2 per cent. Over the past few years, management has been gradually increasing the dividend.

Technical analysis

Year-to-date, the stock price has been relatively unchanged, declining 2 per cent. However, this is above the return for the TSX index, which is down 9 per cent.

There has been strong buying in the stock after the company reported better-than-expected second quarter fiscal 2016 results. On December 3, nearly 350,000 shares traded, above the average daily volume over the past 90 days of just over 39,000 shares.

There is upside resistance between $17.50 and $17.75, and then at $18. The stock has large downside support at $16, just below the stock's 200-day moving average of $16.10.

The relative strength index is at 69, implying the shares are near overbought levels. Generally, a reading at or above 70 indicates an overbought condition.

As always, I strongly encourage readers to consult a financial advisor, and to do their own proper due diligence before taking any investment action.

Below is a list of stocks in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows.