The big news released this morning was the better-than-expected U.S. non-farm payrolls report indicating 211,000 jobs were created in April above expectations of 190,000. The U.S. unemployment rate was 4.4 per cent, the lowest level since 2007.
Briefly recapping Thursday's market action, major U.S. stock markets closed relatively unchanged, while the heavily weighted resource Canadian benchmark plunged.
In the U.S., the Dow Jones Industrial Average declined 0.03 per cent, the S&P 500 index advanced 0.06 per cent, and the Nasdaq composite index picked up 0.05 per cent.
In Canada, the S&P/TSX composite index dropped 146 points, or 0.94 per cent. There were just 48 securities in the TSX Index that advanced, 200 securities declined in value, and two stocks closed the day unchanged. Losses were led by declines in the energy and materials sectors.
Year to date, the TSX Index is up 0.71 per cent year. In the U.S., the Dow Jones Industrial Average is up 6.02 per cent year to date, the S&P500 index is up 6.73 per cent, and the Nasdaq composite has rallied 12.86 per cent.
On today's TSX Breakouts report, there are only 15 stocks on the positive breakouts list (stocks with positive price momentum), and a staggering 94 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a company that appears on the positive breakouts list.
We last featured the company in May 2016, and since then, the share price has rallied over 200 per cent. While the stock price appears due for a pause after rallying 149 per cent year to date, the positive price momentum may continue given the company's robust growth profile appears intact. Furthermore, the stock has a potential near-term catalyst. Highlighted today is health care stock Theratechnologies Inc. (TH-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Theratechnologies is a specialty pharmaceutical company focused on products for patients with HIV. A lead product for the company is EGRIFTA, which is used to treat excess abdominal fat in HIV-infected patients with lipodystrophy. However, a major catalyst for the company is the potential approval by the U.S. Food and Drug Administration (FDA) of ibalizumab, a therapy used to treat HIV patients with multi-drug resistance, and subsequent U.S. product launch of the product, if approved. Phase III clinical trial data was positive.
On May 3, the company announced that its partner has completed the submission of a Biologics License Application (BLA) to the U.S. FDA for ibalizumab. A FDA decision could be announced later this year. As indicated in the news release, "Ibalizumab has received "Breakthrough Therapy" designation from the FDA, which is given if a therapy may provide a substantial improvement over what is currently available to address a serious and life-threatening condition. The FDA also granted "Orphan Drug" designation."
In terms of timing, in the recent Management's Discussion and Analysis, the company indicated, "Our goal is to receive marketing approval and launch ibalizumab on the United States market in fiscal 2017."
Dividend policy
The company is focused on growth and currently does not pay its shareholders a dividend.
Analysts' recommendations
There are six analyst covering the company. The stock currently has five buy recommendations and one sell recommendation (from the analyst at EVA Dimensions, who has never had a buy recommendation on the stock).
The six firms providing research coverage on the company are as follows in alphabetical order: Canaccord Genuity, CIBC World Markets, Echelon Wealth Partners, EVA Dimensions, Mackie Research Capital, and National Bank Financial.
Revised recommendations
This month, three analysts revised their target prices higher. Neil Maruoka, the analyst at Canaccord Genuity, increased his target price to $7.50 from $6.50. Endri Leno from National Bank Financial lifted his target price to $7.15 from $6.50, and Andre Uddin from Mackie Research Capital tweaked his target price higher to $7.90 from $7.60.
Financial forecasts
The Street is forecasting solid earnings growth for the company. The consensus revenue estimates are $48-million in fiscal 2017 (the company's fiscal year end is November 30), $111-million in fiscal 2018, $194-million in fiscal 2019, and $176-million in fiscal 2020. The Street is forecasting earnings before interest, taxes, depreciation and amortization (EBITDA) of $31-million in fiscal 2018, $73-milion in fiscal 2019, and $141-million in fiscal 2020. The consensus earnings per share forecasts are 34 cents in fiscal 2018, 84 cents in fiscal 2019 and $1.56 in fiscal 2020.
Forecasts have been rising. For instance, four months ago, the consensus revenue estimates were $79-million in fiscal 2018 and $154-million in fiscal 2019. The Street was expecting EBTIDA of $22-million in fiscal 2018 and $52-million in fiscal 2019. The consensus earnings per share estimates were 23 cents for fiscal 2018 and 59 cents for fiscal 2019.
Valuation
The stock is often valued on a discounted cash flow (DCF) basis.
The average 12-month target price is $7.96, implying the share price has over 16 per cent upside potential over the next year. Individual target prices provided by five firms are as follows in numerical order: $7.15, $7.25, $7.50, $7.90, and $10.
Insider transaction activity
Since the beginning of 2017, there has only been one insider transaction. On April 7, Philippe Dubuc, the company's chief financial officer, purchased 3,400 shares increasing his portfolio's position to 16,400 shares.
Chart watch
Year-to-date, the share price has soared 149 per cent. If this small cap health care stock, with a market capitalization of $500-million, was include in the S&P/TSX composite health care sector index, it would be the top performing stock in the sector.
Given its spectacular move higher, the stock is in overbought territory with a relative strength reading of 70. Generally, a reading at or above 70 indicates an overbought condition.
The share price may be due for a pause for the stock to digest these stellar gains. Should the share price retreat, there is downside support around $6, which is close to its 50-day moving average (at $5.70).
Looking at the upside potential, the stock price could rally to the $8 level.
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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.