Tuesday’s TSX breakouts: This stellar-performing stock has 11 ‘buy’ recommendations

On Monday, North American equity markets closed with modest gains.

In the U.S., the Dow Jones Industrial Average gained 0.58 per cent, the S&P 500 Index rallied 0.52 per cent, and Nasdaq composite advanced 0.26 per cent.

In Canada, the S&P/TSX composite index added 42 points, or 0.29 per cent to close at 14,682. There were 110 securities in the Index that advanced, 125 securities declined, and five stocks closed the day unchanged. The Index is up 0.68 per cent month to date, up 4.39 per cent quarter to date, and has a gain of 12.85 per cent year to date.

Markets may remain quiet over the final two trading sessions of the month as it is a seasonally quiet period and investors will be awaiting the release of the U.S. August non-farm payrolls data on Friday.

Given the sleepy stock markets, today's Breakouts report is brief. There are 25 securities on the positive breakouts list (stocks with positive price momentum) and just nine stocks on the negative breakouts list (stocks with negative price momentum).

Of the stocks on the positive breakouts list, only seven have double-digit returns expected over the next 12 months as measured by the average one-year target prices forecast by analysts. More than half of the stocks in the positive breakout list have returns of 5 per cent or lower forecast over the next year. Accordingly, it can be a challenge for investors to find stocks with material upside potential.

Discussed today is a stock from the positive breakouts list that has a double-digit return expected over the next year. The security highlighted today is Tourmaline Oil Corp. (TOU-T).

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

The company

Calgary-based gas-weighted Tourmaline Oil is an oil and gas exploration, development, and production company with operations in three core regions in the Western Canadian Sedimentary Basin: the Alberta Deep Basin, the northeast B.C. Montney, and the Peace River High Charlie Lake complex.

The company has a proven leadership team with Michael Rose at the helm. He is the president, chief executive officer, and chairman at Tourmaline and was the previous president, chief executive officer, and chairman, at Duvernay Oil Corp. when the company received a takeover offer from Shell Canada Limited.

After the market closed on August 3, Tourmaline reported better-than-expected second-quarter results. Cash flow per share was 58 cents, ahead of the consensus forecast of 54 cents. Operating costs came in at $3.41/barrel of oil equivalent (boe), down 17 per cent year over year. All-in cash costs declined to $6.58/boe. The share price jumped 4.7 per cent the following trading day on high volume with over 2-million shares traded.

The company's growth profile is attractive. Management is forecasting the company's Montney production to increase by 50 per cent over the next 18 months. The company's growth is fueled by approximately 100 new wells expected to come on-stream by the end of this year.

The company has guided to average production of between 190,000 barrels of oil equivalent per day (boepd) and 195,000 boepd for 2016, and expects to exit this year with production of between 210,000 and 215,000 boepd.

The company has a solid balance sheet. In April, the company raised approximately $281.6-million through a bought deal financing, issuing over 10-million shares at a price of $27.11 per share.

Dividend policy

The company is focused on growth and currently does not pay its shareholders a dividend.

Valuation

The stock is commonly valued on an enterprise value-to-debt adjusted cash flow basis. The average one-year target price is $40.77, which is based on 11 'buy' recommendations, implying a potential return of 13 per cent. . Target prices provided by 11 firms range from a low of $37.50 to a high of $45. Individual target prices are as follows: $37.50, two at $38, $39, two at $40, $40.50, two at $42, two at $45.

Related: Undervalued dividend stock with 4 'buy' calls and 33% upside forecast

Analysts' recommendations

According to Bloomberg, there are 11 analysts with 'buy' recommendations, and two analysts have 'sell' recommendations although these two firms do not provide target prices.

Analysts have been revising their forecasts higher. The current consensus cash flow per share estimate is $3.14 in 2016, rising 57 per cent to $4.92 in 2017. Several months ago, on June 1, for instance, the consensus cash flow per share estimate was $2.93 for 2016 and $4.40 for 2017.

Chart watch

Shares of Tourmaline have been in an uptrend since the beginning of the year. This stock has been a strong performer, rising 61 per cent year-to-date.

There is initial upside resistance at $40, and after that around $43.

There is downside support around $35, and then at its 50-day moving average which lies at $33.78. Failing that, there is support around $30, as well as around $28.50, which is close to its 200-day moving average (at $28.56).

The relative strength index is at 66, suggesting the shares are approaching overbought territory. Generally, a reading of 70 or high indicates an overbought condition.

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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.

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.