Today, here are a few important reports to check out.
In Canada, January housing starts data will be released. In addition, it is an active day for earnings reports with companies such as ATS Automation Tooling Systems Inc. (ATA-T), Intact Financial Corp. (IFC-T), Canfor Corp. (CFP-T), Just Energy Group Inc. (JE-T), Arc Resources Ltd. (ARX-T), Home Capital Group Inc. (HCG-T), Mullen Group Inc. (MTL-T), and Suncor Energy Inc. (SU-T) all scheduled to release their quarterly results. In the U.S., weekly mortgage applications increased 2.3 per cent on a seasonally adjusted basis compared to the prior week. The U.S. Energy Information Administration will be releasing its weekly oil inventory report.
This morning, the price of oil continues to drift lower, natural gas futures are down 1 per cent, and the price of gold continues to strengthen.
Briefly recapping Tuesday's stock market returns, all major North American equity markets closed with minor gains.
In the U.S., the Dow Jones Industrial Average gained 0.19 per cent, the S&P 500 index inched up 0.02 per cent, and Nasdaq composite index advanced 0.19 per cent.
Turning to Canada, the S&P/TSX composite index increased 42 points, or 0.27 per cent. There were 132 securities in the TSX Index that advanced, 113 securities declined in value, and four stocks closed the day unchanged.
The TSX Index is up 1.38 per cent year-to-date.
On today's TSX Breakouts report, there are 64 stocks on the positive breakouts list (stocks with positive price momentum), and 31 stocks appear on the negative breakouts list (stocks with negative price momentum).
The security highlighted today would have appeared on the positive breakouts list, but its market capitalization is at $198-million, it just below the minimum screening parameter of $200-million. The stock price of this company has doubled in value year-to-date, rising 117 per cent, and analysts believe there is an additional 85 per cent upside. The company is UrtheCast Corp. (UR-T). This is a stock best suited for consideration by growth investors with a high risk tolerance within a well-diversified portfolio given that its share price can be very volatile.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Vancouver-based UrtheCast is a company whose technology provides satellite imagery of the planet. The company has four Earth Observation sensors in space with two cameras on the International Space Station.
According to an investor presentation from October, insider ownership stood at approximately 15 per cent, suggesting insiders interests are aligned with shareholders.
On Feb. 7, the company announced that it secured a long-term agreement with an existing agriculture customer, GEOSYS worth $180-million (U.S.). Wade Larson, the president and chief executive officer stated, "We are honored to announce GEOSYS as the UrtheDaily anchor customer for agriculture. The selection of UrtheDaily by GEOSYS, a pioneer in digital agriculture, validates our belief that UrtheDaily is the remote-sensing constellation of choice for the sophisticated geoanalytics market."
Importantly, additional agreements may follow. As indicated in the news release, "This agreement represents UrtheCast's first successful conversion of the three previously announced memoranda of understanding (MOUs) for the purchase of OptiSARTM satellites into binding contracts." The company expanded on the potential of future agreements saying, "UrtheCast is in advanced discussions with the remaining MOU counterparties and other potential customers for the remaining satellites in the OptiSARTM Constellation."
Dividend policy
The company does not pay its shareholders a dividend.
Financial forecasts
The Street is forecasting revenues of $70.7-million in 2016, rising to $76.5-million in 2017, and increasing to $90.2-million the following year. The consensus EBITDA estimate is $6.4-million in 2016, and is forecast to jump to $26.3-million in 2017, and rise over 16 per cent to $30.7-million the following year . The company is expected to report a profit, positive earnings per share, this year.
Looking back at the past year, financial forecasts have been revised down significantly. For instance, one year ago, the Street was anticipating revenues of $104-million in 2016 and $200-million in 2017. The consensus EBITDA estimates were $22-million for 2016 and $53-million for 2017.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 8.5 times the 2017 consensus estimate. The consensus one-year target price is $3.50, suggesting a potential return of 85 per cent over the next 12 months. However, target prices vary considerably from a low of $2.25 (implying 19 per cent upside potential) to a high of $4.75 (suggesting the share price may rally an additional 151 per cent). Individual target prices are as follows in numerical order: $2.25, $3, $4, and $4.75.
Analysts' recommendations
There are four analysts that have provided research coverage since November, and all four analysts have "buy" recommendations. More specifically, three analysts have "buy" recommendations and one analyst has a "speculative buy" recommendation, reflecting the stock's elevated risk profile.
The firms providing research coverage are as follows in alphabetical order: Canaccord Genuity, Clarus Securities, Dundee Capital Partners, and Raymond James.
Revised target prices
Throughout 2016, analysts' target prices were reduced significantly. In July, for instance, Eyal Ofir, the analyst at Dundee Capital Partners had a target price of $4. Noel Atkinson, the analyst from Clarus Securities, had a target price of $7.25. In addition, Steven Li, the analyst from Raymond James, had a target price of $5.
Chart watch
The share price has experienced a parabolic move with the stock price more than doubling in value year-to-date.
On Tuesday, the share price jumped 22 per cent on very high volume. Over 2.8-million shares traded, well above the two-month historical daily average trading volume of approximately 850,000 shares.
The stock price just experienced a bullish 'golden cross', with the 50-day moving average (at $1.03) crossing above the 200-day moving average (at $1.01). Also positive is the Chaikin Money Flow oscillator, which just turned positive. A reading above 0 is bullish, while a reading below 0 is bearish.
In terms of key resistance and support levels, the share price has initial overhead resistance around $2, and after that, around $2.50. There is downside support around $1.50.
The relative strength index is at 85, suggesting the shares are in overbought territory. Generally, a reading at or above 70 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.
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.