On today's TSX Breakouts report, there are 56 stocks on the positive breakouts list (stocks with positive price momentum) and 22 stocks are on the negative breakouts list (stocks with negative price momentum). Energy stocks are gaining a presence on the positive breakouts list, representing just under one-third of the names on the list. Meanwhile, gold and silver stocks are under pressure dominating the negative breakouts list.
Discussed today is an energy stock that appears on the positive breakouts list. For much of 2017, I have not highlighted many energy stocks. However, we are seeing positive price momentum emerge in numerous energy stocks. As a result, the negative investor sentiment for energy stocks may soon shift, especially if commodity prices continue to strengthen. The security featured today is NuVista Energy Ltd. (NVA-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based NuVista Energy is a gas-weighted producer with its operations focused on the Montney formation of the Alberta Deep Basin – in the Wapiti Montney zone.
On Oct. 31, the company reported solid third-quarter financial results that sent the share price soaring on high volume. The company reported production of 29,405 boe/d (barrels of oil equivalent per day), ahead of the consensus estimate of 28,046 boe/d. Cash flow per share was 24 cents, exceeding the Street's forecast of 20 cents. Management announced a significant increase to its credit facility limit, rising to $310-million from $235-million. For 2017, management is forecasting average production to be between 28,000 boe/d and 31,000 boe/d. Capex guidance for 2017 is anticipated to be between $280-million and $300-million. The company has a strong balance sheet to support its expected growth.
The company has hedges in place to mitigate the downside risk. In the earnings release, management indicate that they, "currently possess hedges which in aggregate cover 66 per cent of remaining 2017 projected liquids production at a floor WTI price of C$65.58/barrel…We currently have 70 per cent of remaining 2017 projected gas production hedged at a floor price of C$3.04/Mcf (million cubic feet)... NuVista's hedge position for 2018 currently provides floor prices of C$69.44/barrel WTI (West Texas Intermediate) and C$2.81/Mcf for approximately 50 per cent of 2018 liquids and natural gas production."
Looking forward, management reiterated its 2018 production guidance of between 35,000 boe/d and 40,000 boe/d. Capex is expected to be between $270-million and $310-million. Management targets production to steadily climb to 60,000 boe/d by 2021. The forecasted production profile can be found in the recent investor presentation posted on the company's website.
Dividend policy
The company does not pay its shareholders a dividend.
Analysts' recommendations
According to Bloomberg, 17 analysts issued research reports on or after Oct. 31, the day the company reported its third quarter financial results, of which 16 analysts issued buy recommendations on the stock while one analyst (from BMO Capital Markets) maintained his 'market perform' recommendation.
This small cap stock with a market capitalization of just under $1.5-billion is widely covered by over a dozen firms including RBC Capital Markets, Scotia Capital, TD Securities, CIBC World Markets, National Bank Financial, BMO Capital Markets, GMP, Industrial Alliance Securities, Raymond James, Canaccord Genuity, and Cormark Securities.
Financial forecasts
The Street is forecasting cash flow per share of $1.05 for 2017, rising 23 per cent to $1.29 in 2018.
The stock has positive earnings revisions. For instance, two months ago, the consensus cash flow per share estimates were 99 cents for 2017 and $1.20 for 2018.
Valuation
Analysts commonly value the stock on an enterprise value-to-debt adjusted cash flow (EV/DACF) basis. The one-year consensus target price is $9.89, suggesting there is over 15 per cent upside in the share price over the next 12 months.
Revised recommendations
Last week, numerous analysts upgraded their recommendations and target prices. Of note, Michael Harvey, the analyst from RBC Capital Markets, lifted his target price to $10 from $9. Kurt Molnar from Raymond James took his target price up to $11 from $9.25 and upgraded his recommendation to a "strong buy" from an "outperform." Brian Krisjansen from Macquarie bumped his target price by $1 to $10. Dan Payne from National Bank Financial increased his target price to $9.75 from $9.25. Michael Charlton from Industrial Alliance Securities took his target price up to $9.50 from $7.80.
Insider transactions
The most recent transaction reported by an insider occurred in August.
On Aug. 30, the chairman of the board of directors Keith MacPhail trimmed 64,500 shares at an average price per share of $6.31, leaving a sizable portfolio position of over 2.4-million shares.
Chart watch
The energy sector in the S&P/TSX composite index has been the worst performing sector both year-to-date and quarter-to-date, declining 9.75 per cent and rising just 0.13 per cent, respectively. That being said, NuVista Energy has been a solid performer, rising 23 per cent year-to-date and climbing 13 per cent quarter-to-date.
Over the past week, the stock price experienced a parabolic move, rising 12 per cent on high volume. As a result, the stock price may pause or retreat as it digests these recent gains.
In terms of key resistance and support levels, the share price recently broke above a key resistance level, $8, with its next ceiling of resistance around the $10 level. After that, the next major resistance level is around $12. Looking at the downside, the stock price has initial support around $8. Failing that, there is support around $7, close it is 50-day moving average (at $7.26).
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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, financial forecasts, 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 indices 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.