On tap for Wednesday, Dollarama will both be reporting third-quarter fiscal 2017 financial results before the market opens. The Bank of Canada announces its rate decision, with no change expected, at 10 a.m. (ET). In the U.S., weekly mortgage applications data is released at 7 a.m. (ET) and the October JOLTS job openings report is due out at 10 a.m. (ET).
On the commodity front, the prices of oil is down slightly, while gold, silver, and copper price are all relatively stable this morning. Once again, natural gas futures contracts are trading higher, up over 2 per cent.
Briefly recapping Tuesday's stock market performance, the strength continued for major North American equity markets.
In the U.S., the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq composite closed up 0.18 per cent, up 0.34 per cent, and up 0.45 per cent, respectively.
In Canada, the S&P/TSX composite index gained 31 points, or 0.20 per cent. There were 118 securities in the TSX Index that advanced, 122 securities declined in value, and seven stocks closed the day unchanged. Just over half of the sectors in the Index, six of the 11, closed in the green led by strength in the financials sector.
The TSX Index is up 0.28 per cent month-to-date, up 2.72 per cent quarter-to-date, and has a year-to-date gain of 16.26 per cent.
On today's TSX Breakouts report, there are 43 stocks on the positive breakouts list (stocks with positive price momentum), and 17 securities on the negative breakouts list (stocks with negative price momentum).
Auto parts makers have been on the rise, one of which appears on the positive breakouts list, Linamar Corp. (LNR-T). Linamar was a top performer in the TSX Index on Tuesday with its share price jumping over 4 per cent. Meanwhile, shares of Magna International Inc. (MG-T) may soon follow Linamar and make an appearance on the positive breakouts list. Month to date, shares of Linamar, and Magna are up over 13 per cent and over 6 per cent, respectively. Highlighted today is Magna International Inc.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Ontario-based Magna is a global auto parts manufacturer with operations in 29 countries.
Before the market opened on Nov. 3, the company reported better-than-expected third-quarter financial results. Earnings per share came in at $1.29 (U.S.), topping the consensus estimate of $1.20. Management also updated its 2016 outlook.
Stocks of Canadian auto makers initially saw their stock prices tumble after a Trump victory was declared in the U.S. presidential election stemming from trade concerns, and also due to worries over lower future automotive demand with interest rates rising. Stock prices have seen recovered.
The shares trade on the Toronto Stock Exchange under the ticker MG, as well as on the New York Stock Exchange under the ticker MGA.
Returning capital to shareholders
The company pays its shareholders a quarterly dividend of 25 cents (U.S.) per share, or $1 per share on a yearly basis. This equates to an annualized dividend yield of 2.3 per cent. Management has increased its dividend every year since 2010.
On Nov. 10, the company announced the renewal of its share buyback program, allowing the company to repurchase up to 38-million shares beginning November 15, 2016 through to November 14, 2017. During the previous 12 months, the company purchased over 22.7-million shares at a weighted average price of $40.63 (U.S.) per share.
Valuation
Analysts commonly value the stock on a price-to-earnings (P/E) basis or an enterprise value-to-EBITDA (EV/EBITDA) basis. According to Bloomberg, the stock is trading at a price-to-earnings multiple of 7.4 times the 2017 consensus estimate. In comparison, shares of Linamar are trading at a P/E multiple of 7.3 times the 2017 consensus estimate. Linamar offers investors a lower dividend yield and its earnings growth profile is lower for 2017.
The average one-year target price is $64.52 (Cdn), implying the share price may appreciate 12 per cent over the next 12 months. Target prices range from a low of $51.78 to a high of $86.62. Individual price targets, expressed in Canadian dollars, provided by 19 firms since October are as follows: $51.78, $54.03, $55.03, $55.35, $56, $57.92, $61.62, $63.05, $65.73, $67.35, $70, $72.44, $73.29, $80.30, and $86.62. Analysts typically express their target prices in U.S. dollars, resulting in odd numbers upon conversion to Canadian dollars.
Analysts' recommendations
This stock is well covered by the Street. Since October, 19 analysts have issued research reports, of which 11 are "buy" recommendations, and eight are "hold" recommendations.
The Street is forecasting EBITDA of $3.74-billion (U.S.) in 2016, rising to $3.95-billion in 2017. The consensus earnings per share estimates are $5.26 in 2016, and anticipated to rise 11.6 per cent to $5.87 in 2017.
Consensus forecasts have been relatively stable. For instance, at the beginning of the year, the consensus EBITDA estimates were $3.55-billion for 2016 and $3.91-billion for 2017, and the consensus earnings per share forecasts were $5.18 for 2016 and $6.04 for 2017.
In comparison, looking at Linamar, the consensus earnings per share estimates are $7.81 for 2016, expanding 2.5 per cent to $8.01 for 2017.
Insider transaction activities
On November 17, the chief executive officer, Donald Walker, sold 125,000 shares.
Chart Watch
Year to date, the share price is up 2.6 per cent, outperforming its peers Linamar and Martinrea International Inc. (MRE-T), which are both in negative territory down 21 per cent and down over 25 per cent, respectively.
The stock price is approaching initial overhead resistance around $60, and after that around $65.
Should the positive momentum reverse, there is downside support around $55, which is also near its 50-day moving average (at $54.67). Failing that, there is support around $50.
The relative strength index is at 66, suggesting the shares are nearing overbought territory. Generally, a reading of 70 or higher 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.