There are no Canadian economic releases today.
In the U.S., December existing home sales will be released at 10 a.m. (ET).
Major commodity price moves this morning include the price of natural gas, which is up 2 per cent, while the price of oil is up slightly. The price of copper is up over 1 per cent.
Briefly recapping Monday's performance, all major North American equity markets closed in the red with minor losses.
In the U.S., the Dow Jones Industrial Average lost 0.14 per cent, the S&P 500 index declined 0.27 per cent, and the Nasdaq composite index fell 0.04 per cent.
Turning to Canada, the S&P/TSX composite index declined 68 points, or 0.44 per cent. There were 86 securities in the TSX Index that advanced, 161 securities declined in value, and three stocks closed the day unchanged.
Month to date, the TSX Index is up 1.26 per cent.
On today's TSX Breakouts report, there are 32 stocks on the positive breakouts list (stocks with positive price momentum), and 21 securities, largely energy stocks, on the negative breakouts list (stocks with negative price momentum).
The security highlighted today may appear on the positive breakouts list sometime in 2017 as the share price has been quietly climbing higher – Maple Leaf Foods Inc. (MFI-T). It is a stock that may retain its value during periods of market volatility and is forecast by analysts to deliver a double-digit return to investors over the next year.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Mississauga-based Maple Leaf Foods manufactures food products under brands such as Maple Leaf, Maple Leaf Prime, Maple Leaf Natural Selections, Schneiders, and Schneiders Country Naturals.
Before the market opened on Nov. 2, the company reported third-quarter financial results that were in-line with the Street's expectations. The company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $87.8-million, up from $58.2-million reported during the same period last year, and just below the consensus estimate of $89.3-million. EBITDA margins were 10.3 per cent. Going forward, management guided to quarterly EBITDA margins ranging between 9 per cent and 11 per cent. Adjusted earnings per share (EPS) came in at 32 cents, in-line with expectations.
As the chief executive officer, Michael McCain, stated on the third-quarter conference call, the company has a "fortress" balance sheet. The company has a strong balance sheet with a cash balance of $444-million as at September 30. The company has the financial capacity to fund its growth and make acquisitions.
The share price was relatively unchanged, declining 18 cents to close at $30.81 that day.
Dividend policy
Maple Leaf Foods pays its shareholders a quarterly dividend of 9 cents per share, or 36 cents on a yearly basis. This equates to an annualized dividend yield of 1.3 per cent.
If history repeats itself, management may announce a dividend increase when they report their year-end result in the upcoming weeks. In February 2016, management announced a 13 per cent dividend increase, raising the quarterly dividend to 9 cents per share from 8 cents. The prior year, in February, 2015, the company announced a substantial dividend increase, hiking the quarterly dividend to 8 cents per share from 4 cents.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 9 times the 2018 consensus estimate. Analysts have target prices that range from a low of $31 to a high of $37. Individual target prices supplied by seven firms are as follows in numerical order: $31, $31.50, three at $34, $36, and $37. The average one-year target price is $33.93, suggesting the shares may realized a potential price return of 18 per cent over the next 12 months.
Analysts' recommendations
According to Bloomberg, eight analysts cover this consumer staples stock, six have 'buy' recommendations and two analysts have 'hold' recommendations.
The eight firms providing research coverage on the company are as follows in alphabetical order: BMO Capital Markets, Canaccord Genuity, CIBC World Markets, EVA Dimensions, RBC Capital Markets, Scotia Capital, TD Securities, and Veritas Investment Research.
Analysts' revisions
In November, Michael Van Aelst, the analyst from TD Securities, increased his target price to $37 from $35 and maintained his 'buy' recommendation. In addition, Sam Labell, the analyst from Veritas Investment Research, tweaked the target price higher to $31.50 from $31.15 while maintaining a 'buy' recommendation on the stock.
Financial forecasts
The consensus EPS estimate is $1.22 in 2016, and is expected to rise 12 per cent to $1.37 in 2017. The Street is forecasting EBITDA of $351-million in 2016 and $372-million the following year.
The stock has experienced slightly negative earnings revisions. For instance, halfway through last year, on July 1, the consensus EPS forecasts were $1.27 for 2016 and $1.43 for 2017. The consensus EBITDA forecasts were $353-million for 2016 and $378-million for 2017.
Insider Transaction Activities
On December 14, William Aziz, who sits on the Board of Directors, purchased 2,050 shares.
Chart watch
The share price had been drifting lower since early November, after the U.S. presidential election results sent cyclical stocks soaring and defensive stocks languishing. However, the share price appears to have stabilized and is climbing higher on reasonable volume.
Year-to-date, the share price is up 2.4 per cent.
In terms of key resistance and support levels, the share price is approaching overhead resistance around $30. Meanwhile, there is initial downside support around $28, close to its 50-day moving average (at $28.23). Failing that, there is support around $26.
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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.