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On Friday, major North American stock markets were mixed with U.S. markets relatively unchanged but the TSX Index increased.
In the U.S., the Dow Jones Industrial Average fell 0.19 per cent, the S&P 500 index lost 0.19 per cent, and the Nasdaq composite index declined 0.02 per cent.
In Canada, the S&P/TSX composite index rallied 80 points, or 0.51 per cent. There were 166 securities in the TSX Index that advanced, 79 securities declined in value, and five stocks closed the day unchanged.
The TSX Index is up 1.95 per cent year-to-date, falling short of the returns of major U.S. stock markets. In the U.S., the Dow Jones Industrial Average is up 5.96 per cent year-to-date, the S&P500 index is up 6.49 per cent, and the Nasdaq composite has rallied 12.34 per cent.
On today's TSX Breakouts report, there are 40 stocks on the positive breakouts list (stocks with positive price momentum), and 35 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a stock that recently appeared on the positive breakouts list. The stock is a top performing stock within the industrial sector. The company has a strong growth profile with both organic and acquisition growth. Analysts are forecasting upside potential of up to 27 per cent, on top of its 20 per cent growth experienced so far this year. The security I am referred to is People Corporation (PEO-X).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Winnipeg-based People Corporation provides employment services such as employee group benefit consulting, pension consulting, and human resource consulting and recruitment services.
On April 17, the company reported solid second-quarter fiscal 2017 financial results (the company's fiscal year-end is August 31). Revenue came in at $25.6-million, up from $18.3-million during the same period last year. This impressive top line growth rate of 39.6 per cent was a combination of acquisition and organic growth with acquisition growth representing 30.1 per cent and organic growth representing 9.5 per cent. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $5.2-million, up from $3.6-million last year, which surpassed the consensus estimate of $4.3-million. The share price rallied 6.9 per cent that day on high volume with nearly 748,000 shares traded. To put this in context, the three-month historical daily average trading volume is approximately 90,000 shares.
In the earnings release, Laurie Goldberg, the chairman and chief executive officer, commented the company's most recent acquisition stating, "The recently announced acquisition of Sirius Benefits Inc. is an important acquisition as it further expands on our third party administration capabilities and establishes us as a significant player in the small group market."
According to Bloomberg, insiders hold a 22 per cent interest in the company.
Dividend Policy
Management is focused on growth, both acquisition and organic growth, and as a result, the company currently does not pay its shareholders a dividend.
Analysts' recommendations
This small-cap industrial stock, with a market capitalization of $270-million, is covered by three analysts - two analysts have "buy" recommendations and one analyst has a "top pick" recommendation.
The three firms providing research coverage are as follows in alphabetical order: Acumen Capital, Cormark Securities, and Laurentian Bank Securities.
Revised recommendations
Analysts' expectations have been rising.
In mid-April, Marc Charbin, the analyst from Laurentian Bank Securities, raised his target price to $6.75 from $5.25. Gavin Fairweather, the analyst from Cormark Securities, lifted his target price to $6 from $5.50, and Brian Pow, from Acumen Capital, increased his target price to $5.75 from $5.50.
Financial forecasts
The Street is forecasting revenue of $106-million in fiscal 2017 rising to $121-million in fiscal 2018. The consensus EBITDA estimate is $19.6-million in fiscal 2017, and anticipated to climb to $23.2-million in fiscal 2018. The consensus earnings per share estimates are 11 cents for fiscal 2017 and 18 cents for fiscal 2018.
The stock has experienced positive earnings revisions. For instance, four months ago, the consensus EBITDA estimates were $18.2-million for fiscal 2017 and $20.9-million for fiscal 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 12.1 times the consensus 2018 estimate, slightly above its three-year historical average of 11.1 times.
The average 12-month target price is $6.17, implying the share price has 16 per cent upside potential over the next year. Individual target prices are as follows in numerical order: $5.75, $6, and $6.75.
Insider transaction activity
Board member Scott Anderson purchased 6,000 shares on March 23 at a price of $4.39 per share and bought 32,200 shares on March 17. In addition, the company's president, Bonnie Chwartacki, purchased 2,500 shares on March 8.
Chart watch
The share price is in an uptrend.
Year to date, the stock price has rallied 20.45 per cent. If the small-cap stock was included in the S&PTSX industrial sector index, it would be the second best performing stock, just below New Flyer Industries (NFI-T), which is up 24.5 per cent. In 2016, the stock price rallied 37.5 per cent.
The stock price has upside resistance between $5.50 and $5.70. Should the share price break meaningfully above this range, the share price could rally to around $6.50.
Should the share price retreat, there is technical support around $5. Failing that, there is strong support around $4.50, close to its 50-day moving average (at $4.65).
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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.
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.