Friday’s TSX breakouts: Top performing stock with 18 ‘buy’ recommendations

On Thursday, it was yet another quiet day in major North American equity markets.

In the U.S., the Dow Jones Industrial Average gained 0.13 per cent, and both the S&P 500 Index and Nasdaq composite advanced 0.22 per cent.

In Canada, the S&P/TSX composite index was relatively unchanged, declining 2 points, or 0.01 per cent, to close at 14,696. Within the S&P/TSX composite index, there were 126 stocks that advanced, 108 stocks declined, and six securities closed the day unchanged.

The TSX Index is up 0.77 per cent month-to-date, up 4.49 per cent quarter-to-date, and up 12.96 per cent year-to-date.

Turning to today's Breakouts Report, there are 41 securities on the positive breakouts list (stocks with positive price momentum), and just 9 stocks on the negative breakouts list (stocks with negative price momentum). Of the 41 securities on the positive breakouts list, only 14 securities have double-digit price returns forecast over the next year as measured by the consensus one-year target prices. The majority of the securities on the positive breakouts list have modest single-digit price returns, or even negative returns, forecast, suggesting many securities may be nearly fully valued or even overvalued.

Discussed today is a stock that is in the minority; it appears on the positive breakouts list and has a double-digit price return anticipated over the next 12 months with its 18 'buy' recommendations. The security I am referring to is Crew Energy Inc. (CR-T).

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

The company

Crew Energy is a natural gas-weighted producer with operations focused mainly in its Montney resource in northeast B.C.

After the market closed on Aug. 4, the company reported second quarter financial results that were relatively in-line with expectations. Production was 21,950 barrels of oil equivalent per day (boe/d), just shy of the consensus estimate of 22,346 boe/d. Cash flow per share came in at 11 cents, a penny above the consensus estimate. Total cash costs declined 28 per cent year-over-year. The company indicated it has hedged approximately 24 per cent of its natural gas exposure for 2017. The financial results had little impact on the share price, which dropped a cent the following trading day.

In the company's second quarter earnings press release, management stated its objective of continuing its, "transition to focus our operations in the NE B.C. Montney with the commencement of a formal process to monetize the value of our heavy oil assets in Alberta and Saskatchewan. A successful sale would effectively position Crew as a 'pure play' Montney producer with only 1,700 boe per day of non-Montney production in the portfolio."

Robust production growth is anticipated by the company. Management is anticipating production to average between 23,000 boe/d to 25,000 boe/d in 2016, up from annual average production of 18,542 boe/d realized in 2015. Looking out to 2018, management is targeting to exit the year with production of 45,000 boe/d, and to achieve production in excess of 60,000 boe/d by 2019.

Dividend policy

The company is focused on growth and currently does not pay shareholders a dividend.

Valuation

Many analysts calculate their target prices based on an enterprise value-to-debt adjusted cash flow multiple. According to Bloomberg, the one-year consensus target price is $7.42, which implies 17 per cent upside potential in the share price over the next 12 months. Target prices range from a low of $6 to a high of $9. Individual target prices provided by 19 firms are as follows: $6, $6.50, two at $6.75, two at $7, $7.25, seven at $7.50, two at $7.75, $8, $8.75, and $9.

Analysts' Recommendations

According to Bloomberg, there are 18 'buy' recommendations, two 'hold' recommendations, and no 'sell' recommendations.

In recent months, analysts have been revising their cash flow forecasts higher for this year and next year. The Street is currently forecasting cash flow per share of 51 cents in 2016, rising over 60 per cent to 83 cents in 2017. At the beginning of May, the consensus cash flow per share estimate was 41 cents for 2016 and 68 cents for 2017.

Chart watch

The stock has been a strong performer within the energy sector of the S&P/TSX composite index, rising 56 per cent year-to-date and is up 14.5 per cent month-to-date.

The stock's chart is positive with the 50-day and 200-day moving averages both steadily rising. There is initial overhead resistance around $7, and after that at $8. The stock has downside support in the $5.75 to $6 range, close to its 50-day moving average (at $5.76). Failing that, there is support at $5, and then around $4.50, which is near its 200-day moving average (at $4.55)

The shares are in neutral territory, neither overbought nor oversold, with a relative strength index reading of 65. 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.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from 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. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.