Today, eight companies in the S&P/TSX composite index are scheduled to release their quarterly results.
T they are: Valeant Pharmaceuticals International Inc. (VRX-T), Laurentian Bank of Canada (LB-T), Bank of Nova Scotia (BNS-T), Bank of Montreal (BMO-T), Sleep Country Canada Holdings Inc. (ZZZ-T), Veresen Inc. (VSN-T), Kinaxis Inc. (KXS-T), and Extendicare Inc. (EXE-T).
In terms of economic reports, fourth-quarter U.S. GDP figures will be announced, along with U.S. housing data with the release of the S&P/Case-Shiller figures, and U.S. consumer confidence data will be reported.
Tonight, at 9 p.m. (ET), U.S. President Donald Trump is scheduled to address to a joint session of Congress. His speech may result in a significant market move the following trading day.
Briefly recapping Monday's stock market returns, U.S. stock markets, once again, reported gains, while the Canadian stock market retreated.
In the U.S., the Dow Jones Industrial Average increased 0.08 per cent, the S&P 500 index gained 0.10 per cent, and the Nasdaq composite index added 0.28 per cent.
Turning to Canada, the S&P/TSX composite index fell 70 points, or 0.45 per cent led by losses in gold stocks. There were just 81 securities in the TSX Index that advanced, 163 securities declined in value, and five stocks closed the day unchanged.
The TSX Index is up 1.15 per cent year to date.
On today's TSX Breakouts report, there are just 12 stocks on the positive breakouts list (stocks with positive price momentum), and 48 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a company that may appear on the positive breakouts list in the future. The federal government's upcoming tabling of the recreational use of marijuana, depending on the timing and outcome, could result in a potential pop in the share price. The company highlighted today Aurora Cannabis Inc. (ACB-X).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Aurora Cannabis, through its subsidiary Aurora Cannabis Enterprises Inc., is a licensed producer of medical marijuana with operations in western Canada with headquarters in Vancouve. The company has a 55,200 square foot facility in Alberta and is currently constructing Aurora Sky, a 800,000 square foot hybrid greenhouse facility at the Edmonton International Airport. Management forecasts Aurora Sky will have production capacity of approximately 100,000 kilograms of marijuana per year. With the facility being built right at the airport, the location is anticipated to provide the company with competitive advantages. The facility is expected to be completed in the second half of 2017.
The company recently announced a $75-million bought deal private placement financing, issuing units at a price of $2.25 per unit. Each unit is comprised of one common share plus half of one common share purchase warrant with an exercise price of $3. This financing will help fund the construction of Aurora Sky.
The company's fiscal year end is June 30.
Dividend policy
Management is focused on growth, and as a result, the company does not pay its shareholders a dividend.
Analysts' recommendations
This small cap stock, with a market capitalization of $795-million, is currently only covered by one analyst, Neil Maruoka from Canaccord Genuity. He has a 'speculative buy' recommendation and his one-year target price is $3.15, suggesting a potential price return of 20 per cent.
Financial forecasts
The analyst is forecasting tremendous growth for the company. His revenue estimates are $32-million in fiscal 2017, $192-million in fiscal 2018, $379-million in fiscal 2019, and $487-million in fiscal 2020. The analyst's EBITDA estimates are $13-million in fiscal 2017, $80-million in fiscal 2018, and $173-million in fiscal 2019, and $243-million in fiscal 2020. Lastly, his earnings per share estimates are 2 cents in fiscal 2017, rising to 17 cents the following year, and anticipated to reach 38 cents in fiscal 2019, and 54 cents in fiscal 2020.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA (EV/EBITDA) multiple of 9.8 times the fiscal 2018 estimate and at 4.5 times the fiscal 2019 estimate. In comparison, shares of Aphria Inc. (APH-X), for instance, are trading at an EV/EBITDA multiple of over 15 times the fiscal 2019 consensus estimate, and shares of Canopy Growth Corp. (WEED-T) trade at an even higher multiple.
Insider transaction activity
Chris Mayerson, co-founder and chief cultivator at Aurora Cannabis, sold 90,000 shares on Feb. 8.
Chart Watch
In October 2016, the stock began trading on the TSX Venture Exchange. Given its limited trading history, a technical analysis report is not available.
Year to date, the share price of Aurora Cannabis is up 14 per cent, delivering performance in the middle of the pack. Peers such as Canopy Growth Corp. (WEED-T) and Aphria Inc. (APH-X) have rallied 36 per cent and 33 per cent, respectively, year to date. While peers, OrganiGram Holdings Inc. (OGI-X) and Emerald Health Therapeutics Inc. (EMH-X) are down 9 per cent and up 3 per cent, respectively.
While this is a small cap stock, trading volume is high. For instance, the two month historical daily average trading volume is over 5-million shares.
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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.