Genworth MI Canada Inc. (MIC-T) is the best performing stock in the S&P/TSX composite financial sector index in the year to date.
The stock has experienced strong price momentum, rising over 10 per cent so far this year.
From a technical perspective, the stock chart for Genworth looks interesting. The share price recently exhibited a bullish "golden cross" pattern as well as a positive "inverse head and shoulders" pattern.
A "golden cross" occurs when a short-term moving average, like the 50-day moving average in this case, crosses above a longer-term moving average, which, in this case, is the 200-day moving average. When this occurs, it marks a potentially positive signal, suggesting the upward price momentum may have traction.
Many traders suggest waiting until the 50-day moving average crosses above the 200-day moving average by a certain percentage, such as 3 per cent, to confirm the bullish signal.
Several weeks ago, a golden cross pattern occurred with the 50-day moving average (currently at $34.16) crossing above the 200-day moving average ($33.11). The last time the stock experienced a "golden cross" was on April 20, 2016, when the share price was $32.54, and just over three months later, on Aug. 8, the share price was up over 10 per cent, closing at $36.
The share price has also recently experienced a bullish "inverse head and shoulders" pattern. The share price broke above the "neckline," a key resistance level, on high volume. This signalled a reversal in the prior downtrend, suggesting that the stock price could rally back above the $40 level.
In addition to a potential gain in the share price, the stock also offers shareholders an attractive dividend yield, paying investors quarterly dividend of 44 cents per share or $1.76 on a yearly basis. This equates to an annualized dividend yield of approximately 4.7 per cent. Management has been steadily increasing the dividend over the years with the most recent dividend hike announced on February 7, along with its fourth quarter results.
From a fundamental perspective, analysts' recommendations vary widely - three analysts have "buy" recommendations, three analysts have "hold" recommendations, and one analyst (at Macquarie) has an "underperform" recommendation.
Target prices range from a low of $32 to a high of $43. Individual price targets are as follows in numerical order $32, two at $36, $37, two at $40, and $43.
This month, six analysts have increased their target prices. Graham Ryding, the analyst at TD Securities, raised his target price to $43 from $40. Tom Mackinnon of BMO Nesbitt Burns lifted his target price by $2 to $40. Scotia Capital's Phil Hardie bumped his target to $37 from $34. Geoffrey Kwan from RBC Dominion Securities increased his target to $36 from $34. Lastly, Jeff Fenwick from Cormark Securities raised his target to $36 from $31.50.
The consensus earnings per share estimates are $4.07 for 2017 and $4.21 for 2018. In 2016, the company reported operating earnings per share of $4.23, up 4 per cent year over year.
After the company reported better-than-expected fourth-quarter financial results on Feb. 7, board member, Brian Kelly, sold 3,250 shares on Feb. 10 in accounts where he holds direct and indirect ownership interests.
This report is based on technical analysis. Technical analysis does not replace fundamental analysis, but can be helpful in identifying companies worth having a closer look at.
Jennifer Dowty