On Wednesday, in the U.S., the Dow Jones Industrial Average fell 0.20 per cent, the S&P 500 increased 0.11 per cent, and the Nasdaq composite index rallied 0.38 per cent.
In Canada, the S&P/TSX composite index added 59 points, or 0.38 per cent. There were 154 securities in the TSX Index that advanced, 92 securities declined in value, and five stocks closed the day unchanged.
The TSX Index is up 2.42 per cent year-to-date.
On today's TSX Breakouts report, there are 30 stocks on the positive breakouts list (stocks with positive price momentum), and 13 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a security that has sharply outperformed its sector peers as well as the TSX Index. The share price is in an uptrend and the stock may soon appear on the positive breakouts list. There are nine analysts that cover this company, and the stock has an unanimous 'buy' call. The consensus target price implies 19 per cent upside potential. The security I am referred to is Enerflex Ltd. (EFX-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Enerflex is a supplier of products and services to the oil and gas industry, providing natural gas compression, gas processing, refrigeration systems and electric power systems. The company is leveraged to the LNG (liquefied natural gas) markets. In terms of geographical revenue breakdown, in 2016, 41 per cent of the company's revenue was from the U.S., 21 per cent stemmed from Canada, and 38 per cent was from the rest of the world.
On March 2, the company reported solid fourth-quarter financial results. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $58-million, topping the consensus estimate of $53-million. Backlog as at December 31, stood at $621-million, up 45 per cent year-over-year. The share price rallied over 5 per cent the following trading day.
Dividend policy
The company pays its shareholders a quarterly dividend of 8.5 cents per share, or 34 cents on a yearly basis. This translates to a dividend yield of approximately 1.8 per cent.
Management has maintained the dividend at this level since January 2015, and has never cut its dividend.
Dividends paid to shareholders over the past five years are as follows: 34 cents per share in 2016, 34 cents per share in 2015, totalled 31 cents per share in 2014, 28.5 cents per share in 2013, and amounted to 25 cents per share in 2012.
Analysts' recommendations
There are nine analysts that cover the company, and all nine analysts have "buy" recommendations.
The nine firms providing research coverage are as follows in alphabetical order: AltaCorp Capital, BMO Capital Markets, CIBC World Markets, , Industrial Alliance Securities, National Bank Financial, Peters & Co., Raymond James, RBC Capital Markets, and Scotia Capital.
Revised recommendations
Numerous analysts have recently made revisions to their target prices – all of which have been positive revisions.
In March, Elias Foscolos, the analyst at Industrial Alliance Securities, raised his target price to $23 from $21.50. In addition, Vladislav Vlad, the analyst from Scotia Capital, lifted his target price by $1 to $27. Jon Morrison, the analyst from CIBC World Markets, increased his target price to $24 from $22, and Jeff Fetterly, the analyst at Peters & Co, raised his target price by $3 to $23.
Financial forecasts
The Street is forecasting improving earnings for the company. The consensus EBITDA estimates are $241-million in 2017, rising 14 per cent to $274-million in 2018.
Financial forecasts have been increasing. For instance, five months ago, the consensus EBITDA estimates were $208-million for 2017 and $228-million for 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 6.9 times the 2018 consensus estimate, slightly above its five-year historical average multiple of 6.5 times, but below its peak multiple of over 8 times during this period.
The average one-year target price is $22.61, implying there is 19 per cent upside potential in the stock price over the next 12 months.
Insider transaction activities
Two senior officials recently exercised options and sold all or part of their shares. Chief financial officer James Harbilas exercised 30,000 options for common shares on March 16, and subsequently sold 6,700 shares on March 23 at a price of $18.25 per share. Earlier this month, on March 9, president and chief executive officer Blair Goertzen exercised 45,000 options for shares, and sold 45,000 shares that same day.
Chart watch
Year-to-date, the share price is up 11 per cent, making it one of the top performing stocks in the energy sector of the S&P/TSX composite index.
The shares have been in an uptrend since mid-2016 but have traded sideways for the past few months, retaining their value despite volatility in commodity price.
Looking at key resistance and support levels, the share price is approaching initial overhead resistance around $19, and after that, around $21. There is initial downside support around $18, close to its 50-day moving average (at $18.30). Failing that, there is support around $16, and then around $15, which is near its 200-day moving average (at 15.07).
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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.