Wednesday’s TSX breakouts: This bank stock is close to fully valued

On Tuesday, the S&P/TSX composite index reported a double-digit return for the year, closing the day with a year-to-date return of 10.4 per cent.

The Index rallied 89 points or 0.63 per cent led by gains from the energy sector. There were 151 members in the TSX Index that advanced, 80 declined, and 3 were unchanged.

On today's report, the number of securities on the positive breakouts list (stocks with positive price momentum) is up to 86 companies. Meanwhile, there are just six stocks on the negative breakouts list (stocks with negative price momentum), half of which are health care stocks.

Discussed below is one of the "Big Six" banks, whose valuation may be close to fully valued – Canadian Imperial Bank of Commerce (CM-T).

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

The company

CIBC is one of Canada's largest financial institutions with total assets of approximately $478-billion and 1,120 branches across the country.

Dividend policy

Management is firmly committed to returning capital to its shareholders. In May, management announced a 2.5-per-cent increase to the quarterly dividend. The company has announced a dividend hikes every single quarter since December 2014.

CIBC pays its shareholders a quarterly dividend of $1.21 per share. This equates to $4.84 per share on a yearly basis, and an annualized yield of 4.65 per cent.

If history repeats itself, another dividend increase could be announced on August 25, when the company reports its third-quarter financial results.

Valuation

According to Bloomberg, the share price is trading at a price-to-earnings multiple of 10.7 times the 2017 consensus estimate. This is above both the three-year and five-year averages of 9.9 times and 9.6 times, respectively. The peak multiple over the past five years is just under 11.5 times.

Analysts' recommendations

According to Bloomberg, the one year price target is $103.39, which is based on four buy recommendations, seven hold recommendations, and four sell recommendations. This suggests the share price is fully valued. Individual price targets range from a low of $87 to a high of $112.

The consensus EPS estimate is $9.50 in 2016, rising 3 per cent to $9.77 in 2017.

Chart watch

Year to date, the share price has appreciated 14 per cent, rallying sharply over the past several months.

The stock has large overhead resistance around $107, near its peaks set in September and December of 2014.

There is downside support at $100, near its 50-day moving average (at $99.88), and failing that around $95, close to its 200-day moving average (at $95.68).

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.