On Friday, major North American stock markets all finished the trading session relatively unchanged.
In the U.S., the Dow Jones Industrial Average dipped 0.01 per cent, the S&P 500 index increased 0.03 per cent, and the Nasdaq composite index inched up 0.08 per cent.
Turning to Canada, the S&P/TSX composite index added 6 points, or 0.04 per cent. There were 115 securities in the TSX Index that advanced, 126 securities declined in value, and nine stocks closed the day unchanged.
Year to date, the TSX Index is up 0.85 per cent. While the Dow Jones Industrial Average is up 6.67 per cent, the S&P 500 index is up 7.91 per cent, and the Nasdaq has rallied 15.36 per cent.
On today's TSX Breakouts report, there are 20 stocks on the positive breakouts list (stocks with positive price momentum), and 25 stocks are on the negative breakouts list (stocks with negative price momentum).
As always, I like to feature a variety of stocks that may appeal to a wide range of investors. Featured today is micro-cap growth stock that would appear on the positive breakouts list if the market capitalization screening threshold was lower. The stock has been a strong performer, rising 23 per cent year to date, rallying over 50 per cent last year, and soaring 77 per cent in 2015. In addition, the company pays shareholders a quarterly dividend, currently yielding 1.7 per cent. The security I am referred to is Brick Brewing Co. Ltd. (BRB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Brick is the Ontario's largest Canadian-owned brewery producing beers, coolers, and ciders from its operations in Kitchener, Ontario, just outside the Greater Toronto Area. Popular brands produced include Laker, Seagram coolers and ciders, and the Waterloo brand.
On April 13, the company reported record fiscal 2017 results (the company's fiscal year end is January 31) and management provided a positive outlook for the year ahead causing the share price to rally over 3 per cent that trading day on high volume. For fiscal 2017, the company reported net revenue of $45.2-million, up from $37.6-million reported in the previous year. Gross margins jumped to 34.8 per cent from 28 per cent reported last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) reached a record $8.8-million, and earnings per share came in at 11 cents, up from 5 cents reported in fiscal 2016.
In the earnings release, the president and chief executive officer George Croft stated, "We have set out a plan that we fully expect will allow us to achieve another year of double-digit growth. Our Kitchener expansion project is well underway, and on track for completion this summer with expected full year recurring savings of $0.6-million. We have introduced a number of new products and packages, including Waterloo Citrus Radler and Margaritaville Classic Margarita, products that we are confident will resonate with our consumers. We are also excited about the upcoming packaging redesign on the core Waterloo brand, and believe it will be a key element in realizing our growth targets in the year ahead."
Dividend policy
Brick Brewing pays its shareholders a quarterly dividend of 0.016 cents per share, or 0.064 cents per share on a yearly basis. This equates to an annualized dividend yield of 1.7 per cent.
In December 2016, management announced a 33 per cent dividend increase, raising it to its present level from 0.012 cents per share. At the time, the chief financial officer Sean Byrne stated, ""The increase in the dividend is simply a continuation of our commitment to deliver value to shareholders. We believe it also speaks volumes about our ability to both invest in growing our business while at the same time increasing returns to shareholders."
Analysts' recommendations
There are four analysts covering this micro-cap consumer staples stock, with a market capitalization of $130-million, and all four analysts have buy recommendations.
The four firms providing research coverage on the company are as follows in alphabetical order: Cormark Securities, Laurentian Bank Securities, M Partners, and Paradigm Capital.
Financial Forecasts
The Street is forecasting revenue of $50.8-million in fiscal 2018, rising 10 per cent to $55.85-million in fiscal 2019. The consensus EBITDA estimates are $9.675-million in fiscal 2018, up from $8.84-million reported in fiscal 2017, and anticipated to rise to $11.6-million in fiscal 2019. The Street is expecting earnings per share to rise to 14 cents in fiscal 2018, up from 11 cents in fiscal 2017, and reach 18 cents in fiscal 2019.
Earnings expectations have been stable. For instance, three months ago, for fiscal 2018, the consensus revenue estimate was $50.6-million, the EBITDA forecast was $9.63-million, and earnings per share was expected to come in at 14 cents.
Valuation
According to Bloomberg, the stock is trading an enterprise value-to-EBITDA multiple of 11.6 times the fiscal 2019 consensus estimate, above its three-year historical average of 9.6 times, and closing in on its peak multiple of just over 12 times during this period.
The average one-year target price is $3.95, suggesting the stock price has over 6 per cent upside potential. Individual target prices as follows in numerical order: $3.65, $3.75, $4 and $4.40.
Revised recommendations
Recommendations and target prices have been stable. Year-to-date, there have been no revisions by analysts.
Insider transaction activity
So far in 2017, there have been no reports of insider buying or selling activities in the public market.
Chart watch
The stock has been a strong performer. If the micro-cap stock was included in the S&P/TSX Small Cap Index, it would be the top performing stock in the consumer staples sector year-to-date with its price return of 23 per cent. In addition, in 2016, the share price rallied over 50 per cent to $3.01 from $2, and in 2015, the share price soared 77 per cent to $2 from $1.13.
The stock can be thinly traded. The three-month historical daily average trading volume is approximately 33,000 shares.
Given the sharp move higher over the past two months, the share price may be due for a pause in order to digest its recent gains. On a pullback, there is technical support around $3.30, close to its 50-day moving average (at $3.28), and further support around $3, near its 200-day moving average (at $3.01).
A major overhead resistance level is around $4.
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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.