Thursday’s TSX breakouts: This energy stock gets a unanimous ‘buy’ rating from analysts

On Wednesday, the S&P/TSX composite index declined 53 points, or 0.37 per cent, barely holding on to its double-digit return for 2016 (up 10.02 per cent year-to-date).

Within the Index, 108 stocks advanced, 123 declined and three stocks were unchanged.

Today, there are 67 securities on the positive breakouts list (stocks with positive price momentum) and two stocks on the negative breakouts list (stocks with negative price momentum).

Many companies are approaching or above the consensus one-year target prices, appearing close to fairly valued. Discussed below is small cap energy stock that analysts believe has 13 per cent additional upside potential, Spartan Energy Corp. (SPE-T).

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

The company

Calgary-based Spartan Energy is an oil-weighted company focused on increasing production from its operations in southeast and west central Saskatchewan.

On May 11, the company reported solid first-quarter operating results. Production averaged 9,683 barrels of oil per day (boe/d), above the consensus estimate of 9,203 boe/d. Cash flow per share came in at 3 cents, in-line with the Street's forecast. The share price advanced 4 per cent that day, trending higher with the price of oil, which rallied 3.5 per cent.

On May 19, management announced plans to acquire Wyatt Oil + Gas Inc. that also has production focused in southeast Saskatchewan. According the press release, the purchase price was approximately $77-million. Management stated in the release that, " Spartan continues to believe that the current commodity price environment will present attractive acquisition opportunities during the second half of 2016 and that Spartan is well positioned to take advantage. Our corporate strategy remains unchanged - we intend to continue to maintain our financial flexibility by spending within cash flow, while seeking to deliver additional per share growth through accretive acquisitions." In March, the company raised approximately $96.3-million in an equity financing, offering shares at a price of $2.41 per share.

Dividend policy

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

Analysts' recommendations

This small-cap company, with a market capitalization of just over the $1-billion mark, is well covered by the Street. Many analysts value the stock on an enterprise value-to-debt-adjusted cash flow basis. According to Bloomberg, the one year price target is $3.89, which is based on 14 buy recommendations. This suggests the share price has 13 per cent upside potential.

The consensus cash flow per share estimate is 19 cents in 2016, rising 68 per cent to 32 cents in 2017.

Chart watch

Year to date, the stock is in an uptrend, rising nearly 46 per cent. Shares of Spartan are approaching initial overhead resistance around $3.50.

There is downside support at $3, which is near its 50-day moving average (at $2.97), and failing that around $2.50, close to its 200-day moving average (at $2.57).

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.