Monday’s TSX breakouts: This 2015 stock leader regains its positive momentum

In today's TSX Breakouts report, there are 71securities on the positive breakouts list (securities with positive price momentum), while there are just three stocks on the negative breakouts list (stocks with negative price momentum).

While it is a positive sign that there is an abundance of stocks breaking out to the upside, a concern is that this leadership is not widespread.

Of the 71 securities on the positive breakouts list, 80 per cent of the securities are from the energy and materials sectors, with the majority of the strength from gold and silver stocks. This resource-led rally continues to drive the S&P/TSX composite higher. Year to date, the Index is up over 7 per cent, outperforming major U.S. equity indexes. For instance, the S&P 500 index is up just 1 per cent year to date and the Nasdaq Composite index is in negative territory so far this year.

Discussed today is a recent entrant to the positive breakouts list, appearing on the list after the company reported strong first-quarter 2016 financial results, Uni-Select Inc. (UNS-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Quebec-based Uni-Select Canada operates two core business segments: it is a distributor of automotive products across the country, and also a distributor of automotive and industrial paint across North America.

On April 27, after the market closed, the company reported better-than-expected first-quarter results sending the stock price soaring by 13 per cent the following day. Revenue was $264-million (U.S.), ahead of the consensus estimate of $258-million. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $21.7-million, and EBITDA margins were 8.2 per cent. Adjusted earnings per share (EPS) came in at 53 cents, well above the consensus forecast of 45 cents.

The company has a solid balance sheet. Last year, the company sold its U.S. auto parts business to Icahn Enterprises L.P. for $321-million (U.S.), providing the company with the financial flexibility to grow its operations and to also sustain its dividend.

Management announced a two-for-one stock split that will take effect later this month.

Looking forward for 2016, management guided to sales of between $1.175-billion and $1.2-billion, using an exchange rate of 75 cents. The Street's sales forecast falls between this range at $1.187-billion. The consensus EBITDA estimate is $102-million (U.S.) in 2016, rising to $112-million in 2017. The Street is anticipating EBITDA margins of 8.6 per cent, at the top end of management forecast range of between 7.75 per cent and 8.75 per cent in 2016. The consensus EPS estimate is $2.60 in 2016, increasing nearly 10 per cent to $2.85 in 2017.

Returning capital to shareholders

Over the years, the company has steadily been increasing its dividend. The company increased its dividend in calendar 2014 as well as in 2015, and last week , management announced a 6 per cent increase to its quarterly dividend, lifting it to 17 cents Canadian per share (on a pre-stock split basis) from 16 cents per share. This equates to a yearly dividend of 68 cents per share, or an annualized dividend yield of 1.1 per cent.

The company has been active with its share buyback program. As of April 26, the company repurchased 674,790 shares under its current buyback program.

Valuation

The stock is valued on an enterprise value-to-EBITDA basis. Analysts' target prices range from a low of $65 to a high of $73. The average one-year price target is $69.17, suggesting the stock price could appreciate over 7 per cent. Individual price targets are as follows: $65, $67, $69, $70, $71 and $73.

Analysts' recommendations

According to Bloomberg, there are five buy recommendations and one hold recommendations. There are no sell recommendations.

Chart watch

In 2015, Uni-Select was a top performing stock in the S&P/TSX composite index rising over 120 per cent. The stock has managed to hold onto most of its stellar gains from last year and is down just 6 per cent year-to-date.

The stock is nearing overhead resistance in the $65 to $66 range, and after that there is large resistance around $70, which is near the stock's record high of $70.43 (its closing price on Dec. 29, 2015). The stock has downside support around $60, close to its 200-day moving average (at $59.52).

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.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.