The S&P/TSX composite index continues to inch closer to a record high and is just 363 points, or a little more than 2 per cent, away from closing at an all-time high.
On tap for Friday, it is a light day in terms of news releases. BRP Inc. will be reporting its third-quarter fiscal 2017 financial results before the market opens. There are no major Canadian economic reports due out, and in the U.S., consumer sentiment data will be released at 10 a.m. (ET).
Briefly recapping Thursday's stock market performances, the strength continued for major North American equity markets in this historically seasonally strong period.
In the U.S., the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq composite closed up 0.33 per cent, higher by 0.22 per cent, and up 0.44 per cent, respectively.
In Canada, the S&P/TSX composite index gained 57 points, or 0.38 per cent. There were 150 securities in the TSX Index that advanced, 94 securities declined in value, and three stocks closed the day unchanged. About half of the sectors in the Index, six of the 11, closed in positive territory led by strength in the financials and real estate sectors.
The TSX Index is up 1.41 per cent month-to-date, up 3.87 per cent quarter-to-date, and has a year-to-date gain of 17.57 per cent.
On today's TSX Breakouts report, there are 75 stocks on the positive breakouts list (stocks with positive price momentum), and just nine securities on the negative breakouts list (stocks with negative price momentum).
The price of natural gas futures continues to push higher to its current level of approximately $3.74 (U.S.), up from under $3 less than a month ago. Highlighted today is a gas-weighted energy stock, Birchcliff Energy Ltd. (BIR-T). The stock may soon appear on the positive breakouts list as it is just pennies away from making an appearance on the list.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Birchcliff Energy is an intermediate oil and gas company with operations focused in the prolific Peace River Arch region in Alberta, which is located adjacent to the border with British Columbia.
After the market closed on November 9, the company reported its third-quarter financial results. The company reported record quarterly average production of 54,538 barrels of oil equivalent per day (boe/d), up 42 per cent year-over-year. Cash flow per share came in at 18 cents, a penny shy of expectations.
The company's anticipated growth profile is impressive. For 2016, the company expects annual average production of between 49,000 boe/d and 51,000 boe/d. For 2017, management is guiding to average annual production of between 70,000 boe/d and 74,000 boe/d.
Management also provided its five-year operational plan, calling for production to exceed 100,000 boe/d by the end of 2018, and to reach approximately 130,000 boe/d by the end of 2021. The five-year plan is based on the following forecasts: the price oil averaging $55 (U.S.) and the price of natural gas averaging $3 (Cdn) over the five year period.
Dividend policy
In a November 9 news release, the company announced that the board of directors has approved the initiation of a quarterly dividend on its common shares. The inaugural dividend is expected to be paid to shareholders in early 2017 with the payout date yet to be announced. The quarterly dividend is expected to be 2.5 cents per share, or 10 cents per share on a yearly basis. This equates to an annualized dividend yield of 1 per cent.
The introduction of a dividend may expand the company's shareholder base to include investors whom only invest in dividend-paying securities.
Valuation
Analysts commonly value the stock on an enterprise value-to-debt adjusted cash flow basis. The average one-year target price is $12.35, implying the share price may appreciate 25 per cent over the next 12 months. Target prices range from a low of $9.75 to a high of $14.25. Individual price targets in numerical order are as follows: $9.75, $11, $11.45, $11.50, five at $12, $12.50, four at $13, $13.50, $14, and $14.25.
Analysts' recommendations
This mid-cap stock, with a market capitalization of $2.6-billion, is well covered by the Street. Since November, 17 analysts have issued research reports, 15 with 'buy' recommendations and two with 'hold' recommendations. The firms providing research coverage are as follows in alphabetical order: Alta Corp. Capital, Beacon Securities, Canaccord Genuity, CIBC World Markets, Cormark Securities, Credit Suisse, GMP, Industrial Alliance Securities, Macquarie, National Bank Financial, Peters & Co. Ltd., Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
The Street is forecasting cash flow per share of 70 cents in 2016, doubling to $1.41 in 2017.
Cash flow forecasts tumbled during the first four months of the year but have since stabilized. For instance, on January 1, the consensus cash flow per share estimates were $1.32 for 2016 and $1.91 for 2017. However, as of May 1, the consensus cash flow per share estimates were 71 cents for 2016 and $1.30 for 2017, relatively close to current forecasts.
Chart watch
Year to date, the stock price has soared 145 per cent and is the third-best performing stock in the S&P/TSX composite index energy sector so far this year, behind Bonavista Energy Corp. and Enerplus Corp. Since the summer, the shares have traded sideways, consolidating between $8 to $10 range, as the stock digests its stellar year-to-date gains.
Should the share price break above $10, the next major resistance level is around $12, and after that in the $15 to $15.50 range. The stock peaked at $15.40 in 2008, as well as in 2011, and closed at a high of $14.83 in June 2014.
There is initial downside support around $9, close to the stock's 50-day moving average (at $9.01). Failing that, there is support around $8.
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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. This profile is not a security recommendation by the author.
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.