Thursday’s TSX breakouts: This oversold large-cap growth stock features a potential return of over 30%

On Wednesday, investors continued to sit on the sidelines ahead of Thursday's referendum vote in the U.K. with the S&P/TSX composite index relatively unchanged, down 9 points to 14,004.

There were 96 stocks in the index that advanced, 138 stocks declined, and six stocks closed unchanged from the previous day. Year-to-date, the Index is up 7.64 per cent.

On this morning's breakouts report, the list is short as the TSX Index has been in a holding pattern. There are 18 securities on the positive breakouts list (stocks with positive price momentum) and 14 securities on the negative breakouts list (stocks with negative price momentum).

Discussed today is a growth stock that has delivered stellar performance over the past number of years. However, in recent weeks, the stock price has come under pressure, declining over 10 per cent since June 3. That being said, analysts are forecasting a healthy recovery in the stock price. This oversold stock is Alimentation Couche-Tard Inc. (ATD.B-T).

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

The company

Alimentation Couche-Tard is a leading convenience store operator with a network of approximately 8,000 stores in North America and over 2,200 stores in Europe operating under banners such as Circle K and Couche-Tard. The company also has independently operated stores. The company's growth has been fueled by acquisitions. Its latest acquisition was announced on June 20 with the purchase of 23 locations in Estonia.

On March 15, the company reported third-quarter fiscal 2016 results that fell short of the Street's expectations. The company reported adjusted earnings per share of 53 cents (U.S.), below the consensus estimate of 59 cents. Lower fuel margins in the U.S. was a contributing factor to the weaker-than-expected results. However, same-store merchandise sales were strong, up 5 per cent in the U.S., 4.3 per cent in Europe, and 3.5 per cent in Canada. Return on equity was solid at 25.4 per cent, up from 24.9 per cent reported last year. The stock price was relatively unchanged that day, closing down 23 cents to $60.75.

Dividend policy

The company pays shareholders a quarterly dividend of 6.75 cents per share or 27 cents on a yearly basis. This equates to an annualized yield of half a per cent.

Valuation

According to Bloomberg, the stock is trading at a price-to-earnings multiple of 16 times the fiscal 2017 consensus estimate, below its three-year historical average of 17.6 times.

Analysts' recommendations

According to Bloomberg, the one-year price target is $68.60, which suggests the share price may appreciate 31 per cent over the next 12 months. There are 11 buy recommendations, one hold recommendation, and one sell recommendation.

The consensus EBITDA estimate is $2.28-billion (U.S.) in fiscal 2016, climbing 12 per cent to $2.56-billion in fiscal 2017. The consensus earnings per share estimate is $2.11 (U.S.) in fiscal 2016, increasing 11 per cent to $2.34 in fiscal 2017.

Chart watch

Year to date, the stock price is down 14 per cent with much of the losses realized this month.

In recent trading days, the share price has moved sharply lower on high volume. On Wednesday, over 3.6 million shares traded on the Toronto Stock Exchange, well above the stock's two-month historical average daily volume of approximately 1.7 million shares, and last Friday over 4.3 million shares traded.

The relative strength index is at 28, suggesting the shares are oversold. Generally, a reading at or below 30 indicates an oversold condition. There is downside support around $52, and failing that at $50.

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.