In terms of news releases, it is a relatively quiet day. There are no key Canadian economic releases.
In the U.S., weekly initial jobless claims and continuing claims data will be reported, as well as the weekly U.S. natural gas storage report released from the U.S. Energy Information Administration. On Wednesday, the price of natural gas futures contracts rallied 4.5 per cent to a two-year high.
Briefly recapping Wednesday's performance, it was a mixed day for major North American equity markets.
In the U.S., the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq composite closed down 0.56 per cent, lower by 0.84 per cent, and down by 0.89 per cent, respectively.
In Canada, the S&P/TSX composite index gained 33 points, or 0.21 per cent. There were 142 securities in the TSX Index that advanced, 102 securities declined in value, and six stocks closed the day unchanged. Gold and silver stocks were up sharply.
The TSX Index is up 1.84 per cent month-to-date, up 4.31 per cent quarter-to-date, and has a year-to-date gain of 18.07 per cent.
On today's TSX Breakouts report, there are 30 stocks on the positive breakouts list (stocks with positive price momentum), and just one security on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that increased sharply on Wednesday, spiking 8 per cent on high volume. If analysts are correct, the stock may appear on the positive breakouts list in 2017. The stock has 10 unanimous 'buy' recommendations, offers shareholders a dividend yield of 3 per cent with dividend growth, and the Street forecasts an average price return of 22 per cent over the next year. The security highlighted is Boralex Inc. (BLX-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Boralex develops and operates renewable energy power generating facilities (wind, hydroelectric, thermal, and solar) in Canada, the United States, and in France.
On Dec. 8, the company announced the acquisition of a 230 megawatt (MW) Niagara Region Wind Farm (NRWF). The acquisition will increase the company's net installed capacity by 21 per cent to 1,338 MW, and extend its portfolio's weighted average power purchase agreement term to 16 years.
In the December news release, Patrick Lemaire, the president and chief executive officer, stated, "The Transaction is expected to create value for our shareholders with double-digit accretion to Boralex's 2017 discretionary cash flow per share." He added, "The financing strategy put in place to secure the Transaction will allow the Corporation to maintain significant financial flexibility to continue developing our high quality growth pipeline. Today, we remain ideally positioned to keep moving forward with our growth strategy focused on developing and acquiring assets associated with long term power purchase agreements and are pleased to announce the upward revision of our 2020 contracted capacity target from 1,650 to 2,000 MW."
Dividend policy
The company currently pays its shareholders a quarterly dividend of 14 cents per share or 56 cents on a yearly basis. This equates to an annualized dividend yield of 3 per cent.
However, the quarterly dividend will be increasing to 15 cents shortly, equating to an annualized dividend yield of 3.2 per cent. A few weeks ago on December 8, the company announced a 7.1 per cent increase to its annual dividend, raising the quarterly dividend to 15 cents per share from 14 cents once the acquisition of Enercon's interest in NRWF is completed.
Earlier this year, in February 2016, the company announced a 7.7 per cent increase in the annual dividend, the first increase since the initiation of a dividend in 2014.
Management targets a payout ratio of between 40 per cent and 60 per cent of discretionary cash flows.
Valuation
Analysts commonly value the stock on an enterprise value-to-earnings before interest, taxes, depreciation and amortization (EBITDA) basis. The average one-year target price is $23.20, implying the share price may appreciate 22 per cent over the next 12 months. Target prices range from a low of $20.25 to a high of $25. Individual price targets are as follows: $20.25, $22, two at $23, $23.25, two at $23.50, $24, $24.50, and $25.
Analysts' recommendations
This small-cap stock, with a market capitalization of $1.4-billion, is well covered by the Street and highly recommended by analysts. The stock has 10 unanimous 'buy' recommendations. Analyst coverage is provided by the following firms in alphabetical order: Alta Corp Capital, BMO Capital Markets, CIBC World Markets, Cormark Securities, Desjardins Securities, Industrial Alliance Securities, National Bank Financial, Raymond James, RBC Capital Markets, and TD Securities.
The Street is forecasting EBITDA of $248-million for 2016, rising over 33 per cent to $331-million in 2017.
Earnings forecasts have been relatively stable for 2016 but have increased materially for 2017. At the start of the year, on January 1, the consensus EBITDA estimates were $252-million for 2016 and $263-million for 2017.
Analysts upgrades
The company has experienced several upgrades by analysts in terms of recommendations and target prices. This week, Sean Steuart of TD Securities increased his recommendation to a "buy" from a "hold," and raised his target price to $22 from $21. Last week, Nelson Ng of RBC Dominion Securities bumped his recommendation to an "outperform"
from a "sector perform," and lifted his target price to $23 from $21. Robert Catellier of CIBC World Markets also increased his target price to $25 from $23 with an "outperform" recommendation.
Insider transaction activities
On Dec. 12, Pierre Seccareccia, who sits on the Board of Directors, purchased 2,000 shares. That same day, Patrick Decostre, Vice President and General Manager of Boralex Europe, purchased 1,200 shares. Two days later, on Dec. 14, Michelle Samson-Doel, a member of the Board of Directors, purchased directly and indirectly, 2,110 shares.
Chart watch
On Wednesday, the share price soared 8 per cent with over 731,000 shares traded. This is well above its two-month historical daily average trading volume of approximately 400,000 shares.
Year to date, the share price is up 31 per cent. The stock price experienced a stellar rally, rising from $12 in September 2015 to $20 in July 2016. Following this strong move, the share price experienced a 50 per cent retracement, falling to the $16 level last month – a key support level.
The stock has strong support around $18, near its 200-day moving average (at $18.04), as well as its 50-day moving average (at $17.81). After that, there is strong support around $16.
In terms of upside resistance, the stock price is approaching initial overhead resistance around $19. After that, the stock has resistance between $20 and $20.50.
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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.