On today's TSX Breakouts report, there are 17 stocks on the positive breakouts list (stocks with positive price momentum), and 46 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a small-cap consumer staples stock that has only been trading on the Toronto Stock Exchange for the past 20 days. However, in time, the stock may appear on the positive price breakouts list. The share price is already up 23 per cent from its initial public offering price of $15.75. The security I am referred to is Jamieson Wellness Inc. (JWEL-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Toronto-based Jamieson Wellness manufactures and distributes natural health products. The Jamieson brand is the best-selling brand in Canada in the VMS (vitamins, minerals, and supplements) market by sales. The company is an industry leader, its market share is at least 2.5 times greater than its closest competitor. The company has a portfolio offering of approximately 240 VMS Jamieson branded products with room to expand.
According to the company's prospectus, management has set a five year growth plan with the following financial targets expected by the year 2021. Revenue of between $390-million and $410-million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $95-million and $100-million. Adjusted EBITDA margins ranging from 23.8 per cent to 25 per cent. In addition, management's goal is to achieve approximately 20 per cent annual growth in its adjusted earnings per share for 2017 through 2021.
The Jamieson brand is sold worldwide. The company exports its products to 40 countries and management sees further international expansion opportunities that are expected to drive further revenue growth. Asia, Eastern Europe, and Middle East are three targeted regions where management sees opportunities to grow. The Chinese market is a region that management believes offers significant revenue growth potential. Currently, the company has 60 products available for sale in China. Management plans to expand its product offering, adding up to 50 new products to the Chinese market by the year 2020. The Chinese VMS market is attractive, it grew at a compound annual growth rate of roughly 9.9 per cent between 2011 and 2015.
In addition to international growth opportunities, demand is forecast to rise drive by: 1) an aging population seeking nutritional supplements and 2) a growing consumer appetite for products aimed at improving physical health and wellness. As an example, within the VMS supplement segment, demand for probiotic products has been a strong area of growth – a relatively recent phenomenon. The North American VMS market is steadily expanding, growing at a compound annual growth rate of 2.9 per cent between 2011 and 2015.
In the prospectus, management indicated that they have the production capacity to meet its growth objectives stating, "We believe that our current manufacturing capacity is sufficient to meet our anticipated volume growth in the medium term and that manufacturing capacity can be added with modest capital expenditures."
The company will be reporting its inaugural financial results as a publicly- listed company after the market closes on Wednesday August 9. The Street is anticipating second quarter revenue to come in at $73.5-million.
Dividend policy
The company will be paying its shareholders a quarterly dividend. Management anticipates the dividend will amount to 8 cents per share or 32 cents per share on a yearly basis, translating to an annualized dividend yield of 1.7 per cent.
Analysts' recommendations
Despite being a small cap stock with a market capitalization of approximately $730-million, four large brokerage firms provide recent research coverage on the company. In July, four analysts initiated coverage on the company – all with buy recommendations.
The firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, RBC Capital Markets, and Scotia Capital.
Financial forecasts
The Street is forecasting revenue of $304-million in 2017, up from $248-million in 2016, and rising to $329-million in 2018. The consensus EBITDA estimates are $49-million in 2017, up from $46.8-million in 2016, and $67-million in 2018. There are three analysts with earnings forecasts of between 53 cents and 74 cents in 2017 and the consensus earnings per share estimate is 91 cents in 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple in the mid-teens.
The average 12-month target price is $21.33, implying the share price has 10 per cent upside potential over the next year. Individual target prices are as follows in numerical order: $19, two at $21, and $22.
Insider transaction activity
There are no reported insider transactions in the public market since the company since the stock began trading.
Chart watch
Since the shares just began trading on the Toronto Stock Exchange in July, there is insufficient historical price data available to analyze the stock on a technical basis.
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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.