On Tuesday, major North American stock markets all closed the trading session with slight losses.
In the U.S., the Dow Jones Industrial Average decreased 0.03 per cent, the S&P 500 index lost 0.14 per cent, and the Nasdaq composite index fell 0.24 per cent. In Canada, the S&P/TSX composite index gave back 4 points, or 0.02 per cent. There were 131 securities in the TSX Index that advanced, 113 securities declined in value, and seven stocks closed the day unchanged. There was a flight to safety with the price of gold climbing 1.6 per cent that sent precious metal stocks rallying. The VIX Index, commonly referred to as a 'fear gauge', spiked to over 15, its highest level since last November.
The TSX Index is up 2.88 per cent year-to-date.
On today's TSX Breakouts report, there are 52 stocks on the positive breakouts list (stocks with positive price momentum), and 11 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a company that is a top performing stock in the gold sector, rising over 52 per cent so far this year. All seven analysts who cover the company have buy recommendations on the stock, and the consensus target price suggests 26 per cent upside potential for the share price over the next year. The company has a near-term catalyst that may expand its valuation – gold production is anticipated to begin later this year. Furthermore, investors do not have to worry about geopolitical risks as its operations are located in Nova Scotia. The security I am referred to is Atlantic Gold Corp. (AGB-X).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Headquartered in Vancouver, the company's gold project is located in Nova Scotia. The firm's Moose River Consolidated Project (MRC project) is comprised of the Touquoy gold deposit, the Beaver Dam deposit, the Cochrane Hill deposit, and the Fifteen Mile Stream deposit. The MRC project is fully permitted, fully financed, and approaching production – production is anticipated to begin in the second half of 2017.
According to a 2015 feasibility study base case scenario, average annual production at its MRC project is anticipated to be 87,000 ounces per year with a mine life of 8.5 years. The firm's open pit operations allows for lower risks and lower costs compared to underground mining, all-in sustaining cash costs are anticipated to be $518 (U.S.) per ounce.
Management's corporate objective was highlighted in its recent investor presentation stating, "Atlantic's internal growth options together with strategic and timely acquisitions of new development properties will provide the platform to build the next intermediate gold producer."
Dividend policy
Management is focused on growth. Consequently, the company does not pay its shareholder a dividend.
Analysts' recommendations
There are seven firms providing research coverage on this small cap stock with a market capitalization of $222-million. The firms providing research coverage are as follows in alphabetical order: Beacon Securities, Canaccord Genuity, GMP, Haywood Securities, National Bank Financial, PI Financial Corp., and Raymond James.
All seven analysts who cover the stock have buy recommendations, one of which has a 'speculative buy' recommendation.
Financial forecasts
All financial figures are expressed in U.S. dollars. The consensus revenue estimates are $14.6-million in 2017, $109-million in 2018, and $120-million in 2019.
The company has had positive earnings revisions. For instance, three months ago, the consensus revenue estimates were $92-million for 2018, and $119-million for 2019.
Valuation
The stock can be valued on a price-to-net asset value basis.
The average one-year target price is $1.61, suggesting there is 26 per cent upside potential in the share price over the next 12 months. Target prices range from a low of $1.30 to a high of $1.80. Individual target prices are as follows in numerical order: $1.30, $1.50, $1.60, $1.65, $1.70, $1.75, and $1.80.
Revised recommendations
Last week, Brian Szeto, the analyst at PI Financial, lifted his target price to $1.80 from $1.50.
Insider transaction activity
There have been no insider buying or selling activities reported so far this year.
Noteworthy of mention is management's significant ownership position, which exceeds 35 per cent.
Chart watch
This small-cap stock is not a member of the S&P/TSX composite index; however, if it was included in the TSX Index, it would be the second best performing stock year-to-date in the Index's material sector, behind Ivanhoe Mines Ltd. (IVN-T), and the top performing gold stock.
The strength in the price of gold is a key driver for Atlantic Gold's share price. The price of gold appears poised to potentially revisit the $1,300 (U.S.) an ounce level, and is currently at a five month high.
Atlantic's stock price remains in an uptrend. However, in recent days, the positive price momentum has been on relatively light volumes. For instance, on Tuesday, the share price rallied over 7 per cent to $1.28 from $1.19, yet trading volume was low with approximately 295,000 shares trading hands, below the three-month historical daily average trading volume of roughly 400,000 shares.
Should the positive price momentum pause and the share price retreat, there is initial support between $1.15 and $1.20. Failing that, there is support between $1 and $1.05, close to its 50-day moving average (at $1.04).
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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.