TSX breakouts: This company is cashed up for growth and could soon retest a record high

On Wednesday, the S&P/TSX composite index rose half a per cent, or 73 points. Year-to-date, the Index is up 8.7 per cent. Within the index, 153 stocks advanced, 75 declined, and six stocks were unchanged. Nine out of the 10 sectors realized gains, the sole exception being the health care sector.

Today, there are 49 securities on the positive breakouts list (stocks with positive price momentum) and just one stock on the negative breakouts list (stocks with negative price momentum).

Discussed below is one health care stock that bucked the sector's slide on Wednesday, rallying on high volume – Knight Therapeutics Inc. (GUD-T).

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

The company

Montreal-based Knight Therapeutics is a company founded in 2014 by Jonathan Goodman, the previous chief executive and co-founder of Paladin Labs, which was acquired by Endo Health Solutions. Prior to being acquired, Paladin's stock price enjoyed a stellar rally owing to its solid fundamentals. The company reported 19 consecutive years of record revenues and the share price climbed from $1.50 to $142 a share. Mr. Goodman's goal with Knight is to replicate his strategy at Paladin of acquiring or working in partnership with other pharmaceutical companies (also known as in-licensing) in order to develop and market prescription and over-the-counter pharmaceuticals products.

On Thursday, the company's recent bought deal equity financing closed. The company raised approximately $230-million, offering shares at $8. This financing strengthens Knight's balance sheet, allowing the company to make acquisitions and continue to grow.

This small cap stock has a market capitalization of approximately $1.1-billion.

Dividend policy

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

Valuation

Generally, the stock is assessed on a sum-of-the-parts methodology. According to Bloomberg, the one-year price target is $9.50, suggesting there is over 10 per cent upside potential in the stock price. Price targets are fairly concentrated. Individual price targets are as follows: $8.50, five at $9, $9.50, two at $10, and $12.

Analysts' recommendations

There are nine buy recommendations and one hold recommendation.

The consensus revenue forecast is $2.9 million in 2016, rising to $9.8 million in 2017.

Chart watch

The stock has a limited trading history as it was publicly listed in 2014. Since then, the share price has been trading predominately between $7 and $8. The stock has appreciated 11 per cent year-to-date.

In April, the share price experienced a bullish "Golden Cross", with the 50-day moving average crossing above the 200-day moving average.

The stock could retest its record high of $9.91, depending on market conditions and operational execution.

There is downside support around $8, near its 50-day moving average (at $8.06), and failing that, around $7.50, near its 200-day moving average (at $7.53), and then at $7.

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.