Tuesday’s TSX breakouts: Oversold buying opportunities are emerging

Given expanding concerns regarding further potential weakness in equity markets, investors continue to seek safety in places such as cash, bonds, high dividend-paying stocks, and gold stocks.

On today's positive breakout list, 83 per cent of the companies listed are gold and silver stocks. The negative breakouts list is dominated by top price performers in 2015 with shares of Kinaxis, New Flyer, Cott, Enghouse, CCL Industries, ProMetic, and FirstService all on the list. All of these stocks were on the list of the top ten 2015 price performers from the S&P/TSX composite index.

Kinaxis, for instance, held the top position, rallying 154 per cent in 2015; however, year-to-date in 2016, it is down 26 per cent. Shares of New Flyer held the No. 3 position in 2015, but are down 13 per cent year-to-date. Shares of Enghouse Systems held the No. 5 position last year, yet are down 29 per cent year-to-date. Investors are taking profits off the table from top performers.

Again, typically, I prefer to focus my attention on the positive breakouts, as these stocks have positive price momentum, usually driven by solid fundamentals. However, the positive breakouts right now are driven by global economic concerns and are mostly safe-haven gold stocks. Consequently, I find the negative breakouts list more interesting to look at - to uncover future buying opportunities once equity markets show signs of a sustainable stabilization, something we have yet to see.

Discussed below is Colliers International Group (CIG-T). A brief outline is provided that may serve as a springboard for further fundamental research.

Colliers is a global real estate service company with operations in 66 countries. The company provides services to real estate tenants, owners, and investors, such as property management, consulting, valuation and appraisal services, and investment sales. In 2015, 37 per cent of the company's revenues were from outsourcing and advisory services. In terms of geographical revenue breakdown, last year, 52 per cent of its revenue was from the Americas (North America and Latin America), 26 per cent was from the EMEA (Europe, the Middle East, and Africa), and 22 per cent was from the Asia Pacific region.

On Feb. 5, the company reported better-than-expected fourth-quarter results with earnings before interest, taxes, depreciation and amortization (EBITDA) of $79-million (U.S.), ahead of the consensus estimate of $74-million. Earnings per share (eps) came in at $1.06, ahead of the consensus estimate of $1.00.

However, management's outlook for 2016 was cautious, calling for mid-to-high single-digit revenue growth, and mid single-digit adjusted eps growth. The stock price decline 5 per cent the day it reported its financial results.

Dividend policy

Colliers pays shareholders a semi-annual dividend of 4 cents per share, or 8 cents per year, equating to an annualized dividend yield of 0.3 per cent.

Valuation

Real estate service companies have been hit hard during this market volatility.

Shares of Colliers are trading at an enterprise value-to-EBITDA (EV/EBITDA) multiple of 7.7 times the 2016 consensus earnings estimate. This is relatively in-line with its peers, which have seen their stock prices tumble and valuations contract, as well. Colliers and its peers were trading at EV/EBITDA multiples in the low double-digits in late 2015.

The company's peers, Jones Lang LaSalle (JLL-N) and CBRE Group (CBG-N), for instance, have declined 35 per cent and 32 per cent, respectively, year-to-date.

Analysts' recommendations

According to Bloomberg, there are seven analysts with buy recommendations, four analysts with hold recommendations, and there are no sell recommendation. The average one-year price target is $42.41 (Cdn), implying a potential price return of 42 per cent over the next year.

The consensus eps forecast is $2.39 (U.S.) in 2016, up 4 per cent from adjusted eps of $2.29 reported in 2015. Earnings per share is forecast by the Street to reach $2.60 in 2017.

Chart watch

This stock chart is weak with the shares down 29 per cent year-to-date with almost all of the price weakness occurring over the past few days. The share price has plunged 28 per cent month-to-date.

Looking at the downside, there is technical support around $42 (Canadian), then around $40.

There is technical resistance around $45, and at $50. The stock also has major resistance at its 200-day moving average at $55.69, and at its 50-day moving average, which stands at $58.52.

The relative strength index is at 24, suggesting the stock is oversold. Generally, a reading at or below 30 indicates an oversold condition. That being said, a stock can remain oversold for some time.

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 stock 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 stock 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 stocks in 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. Stocks on the positive breakouts list have displayed positive price momentum during this period. Stocks on negative breakouts list have experienced negative price momentum.