This morning, North American markets look to open relatively unchanged from Friday. Market activity is expected to become quiet in the upcoming days as the holidays approach.
On the commodity front, the price of oil is relatively stable, as is the price of gold. The prices of gas and copper are under some pressure.
Briefly recapping Friday's stock market performance, major North American equity markets closed in relatively neutral territory.
In the U.S., the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq composite closed down 0.04 per cent, down 0.18 per cent, and drifted lower by 0.36 per cent, respectively.
In Canada, the S&P/TSX composite index gained 34 points, or 0.22 per cent. There were 139 securities in the TSX Index that advanced, 101 securities declined in value, and 10 stocks closed the day unchanged. There were six sectors in the Index that closed with gains led by leadership in the utilities, real estate, and energy sectors.
The TSX Index is up 1.12 per cent month-to-date, up 3.57 per cent quarter-to-date, and has a year-to-date gain of 17.23 per cent.
On today's TSX Breakouts report, there are 42 stocks on the positive breakouts list (stocks with positive price momentum), and 33 securities on the negative breakouts list (stocks with negative price momentum).
Highlighted today is a gas-weighted energy stock that has been a top performer. The company has a strong growth profile that may support additional upside in the stock's valuation for 2017. The stock highlighted today is Painted Pony Petroleum Ltd. (PPY-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Painted Pony is a natural gas play focused on expanding production from the prolific Montney formation in northeast British Columbia.
The company has solid growth ahead owing largely to the newly constructed AltaGas Townsend Facility, which will drive higher production by providing additional processing capacity. Management is forecasting to exit 2016 with production of 40,000 boe/d (barrels of oil equivalent per day), and to exit 2017 with production of 68,000 boe/d in 2017.
On Nov. 13, management provided shareholders with an operational update announcing, "Painted Pony has approved the construction by AltaGas of a 100 MMcf/d (million cubic feet per day) expansion to the Townsend Facility, expected to be completed and on-stream in October 2017. The Corporation previously expected that an expansion to the Townsend Facility would occur in 2018. The impact of this accelerated expansion is an expected 19% increase in fourth quarter 2017 exit production volumes to approximately 408 MMcfe/d (68,000 boe/d) from previous expectations of 342 MMcfe/d (57,000 boe/d). This will increase annual average daily production by 4% to 288 MMcfe/d (48,000 boe/d) from previously expected annual average daily production volumes of 276 MMcfe/d (46,000 boe/d). With the accelerated expansion of the Townsend Facility, Painted Pony now anticipates 2017 forecasted exit production volumes to be approximately 408 MMcfe/d (68,000 boe/d), a 19% increase in fourth quarter 2017 exit production volumes from previous expectations of 342 MMcfe/d (57,000 boe/d) and exit production growth of 70% when compared to 2016 forecasted exit production volumes of 240 MMcfe/d (40,000 boe/d). The capital cost of this expansion is expected to be 30% - 35% less per MMcf/d of processing capacity than the first phase of the Townsend Facility which was commissioned in July of 2016."
Dividend policy
Management is focused on growth and currently does not pays its shareholders a dividend.
Valuation
Analysts commonly value the stock on an enterprise value-to-debt-adjusted cash flow basis.
The average one-year target price is $11.92, implying the share price may appreciate 26.8 per cent over the next 12 months. Target prices range from a low of $9.25 to a high of $16.50. Individual price targets in numerical order are as follows: $9.25, $9.50, three at $10, $10.50, two at $11, two at $11.50, $13.50, $14, $14.50, $16, and $16.50.
Analysts' recommendations
This small-cap stock, with a market capitalization of $941-million, is well covered by the Street. Since November, 15 analysts have issued research reports, 12 with 'buy' recommendations and three analysts have 'hold' recommendations. These 15 analysts are from the following firms in alphabetical order: Alta Corp. Capital, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Cormark Securities, Credit Suisse, Desjardin Securities, GMP, Industrial Alliance, National Bank Financial, Paradigm Capital, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
The consensus cash flow per share estimates are 55 cents in 2016, soaring to $1.66 in 2017.
Consensus estimates have been rising in recent months. For instance, at the beginning of May the consensus cash flow per share forecast was 49 cents for 2016 and $1.34 for the following year.
Chart watch
If the small-cap stock was included in the S&P/TSX composite index it would be the top performing stock in the energy sector year-to-date with a gain of 170 per cent.
The stock price is approaching initial overhead resistance around $10. Beyond that, there is resistance around $12, and after in the $14 to $15.50 range.
There is downside support around $9, which is near its 50-day moving average (at $9.08).
The small cap stock is liquid with the two-month historical daily average trading volume at approximately 2.8-million shares.
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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 is not a stock recommendation.
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.