On today's TSX Breakouts report, there are 25 stocks on the positive breakouts list (stocks with positive price momentum) and 46 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a dividend stock that appeared on the positive breakouts list earlier this week. The company highlighted below is CanWel Building Materials Group Ltd. (CWX-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Vancouver-based CanWel operates two business segments: Building Materials Distribution and Forestry.
The Building Materials Distribution accounted for 96 per cent of the company's revenues in the third quarter. This business segment is involved in the distribution of building materials, lumber, and renovation products to Canadian and U.S. customers. As a result, Canadian and U.S. housing starts data is important for investors to monitor. In addition, CanWel operates a forest products company through its Jemi Fibre division. There is seasonality in the company's operations with the company realizing the highest revenue in the second and third quarters.
After the market closed on Nov. 9, the company reported better-than-expected top line third-quarter financial results.
Revenues were $316.8-milion, up 14.7 per cent year-over-year, surpassing the Street's forecast of $296.8-million. Sales in the Building Materials Distribution segment increased 17.5 per cent year-over-year. Gross margins came in at 13.1 per cent, 40 basis points higher year-over-year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at a record $21.7-million, exceeding the consensus estimate of $20.9-million. EBITDA margins were 6.8 per cent and earnings per share came in at 17 cents, in-line with the Street's expectations. The share price rallied 1.7 per cent the following trading day on high volume with over 500,000 shares traded. The three-month historical daily average trading volume is approximately 184,000 shares.
So far this year, the company has tapped equity markets by raising capital twice to fund its growth. Most recently, in September, the company completed a $57-million bought deal financing, issuing over 9.8-million subscription receipts at a price of $5.85 per subscription receipt. The proceeds were used to fund the $82-million (U.S.) acquisition of Hawaiian building products company, Honsador Building Products. The purchase of Honsador was completed on Oct. 2, and investors will start to see an earnings contribution when the company reports its fourth-quarter results in early 2018. Management anticipates the acquisition will be accretive to earnings and free cash flow by between 10 per cent to 15 per cent; however, cost synergies could expand these forecasts. It is important to note that with this acquisition, an increasing amount of the company's revenue will come from the U.S., increasing their foreign currency exposure.
The company pays its shareholders a quarterly dividend of 14 cents per share, or 56 cents per share on a yearly basis. This equates to an annualized dividend yield of 8.3 per cent. The company has maintained its dividend at this level since 2012.
This small-cap stock with a market capitalization of $523-million is well covered by Street. After the company reported its third-quarter results, seven analysts released positive reports on the company with every single analyst issuing a buy recommendation on the stock.
The seven analysts issuing recent research on the company are from the following firms in alphabetical order: Canaccord Genuity, Cormark Securities, GMP, Haywood Securities, National Bank Financial, Raymond James and RBC Capital Markets.
A few days ago, Leon Aghazarian, the analyst from National Bank Financial, lifted his target price to $7.50 from $7, as did Gavin Fairweather, the analyst from Cormark Securities.
The Street is forecasting EBITDA of $62.3-million in 2017, rising 26 per cent to $78.6-million in 2018, and climbing to $85.4-million in 2019. The consensus earnings per share estimates are 43 cents in 2017, 50 cents in 2018, and 60 cents in 2019.
Earnings expectations have been stable for 2017 but increased for 2018. For instance, three months ago, the consensus EBITDA estimates were $60-million for 2017 and $66.5-million for 2018.
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 8.8 times the 2018 consensus estimate, below its three-year historical average of 9 times and at a large discount to its peak multiple of approximately 11.5 times during this time period. Looking forward, CanWel trades at an EV/EBITDA multiple of 8.1 times the 2019 consensus estimate.
On a price-to-earnings basis, the stock is trading at a multiple of 11.3 times the 2019 consensus estimate, slightly above its three-year historical average of 10.4 times.
The consensus 12-month target price is $7.53, implying the share price has nearly 12 per cent upside potential over the next year (including the dividend this equates to a potential total return of 20 per cent). Individual target prices are as follows in numerical order: $7.45, five at $7.50, and $7.75..
Insider transaction history
There has not been any large (valued in excess of $10,000) buying or selling activity in the public markets reported by insiders since August. On August 9, the company's Chief Executive Officer and Chairman of the Board Amar Doman bought 500 shares at an average price per share of $5.97 – a relatively small trade. However, the previous day, he acquired 38,100 shares. These purchases increased his portfolio's holdings to 63,495 shares. Of note, Mr. Doman has over 12.6-million shares in an account that he has indirect ownership (The Futura Corporation).
Year-to-date, the share price is up 12 per cent.
In terms of key technical resistance and support levels, the stock has major overhead resistance around $8. In terms of downside support, the stock has solid support just above $6, close to the 50-day moving average (at $6.39) and 200-day moving average (at $6.23).
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 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.
|Positive Breakouts||Nov. 15 close|
|ATD.B-T||Alimentation Couche-Tard Inc||$64.49|
|CGY-T||Calian Group Ltd.||$34.08|
|CMED-T||CanniMed Therapeutics Inc.||$19.80|
|KBLT-T||Cobalt 27 Capital Corp.||$9.70|
|DRM-T||DREAM Unlimited Corp||$7.91|
|EMH-T||Emerald Health Therapeutics Inc.||$2.45|
|EQB-T||Equitable Group Inc||$63.32|
|WN-T||George Weston Ltd||$112.45|
|HCG-T||Home Capital Group Inc||$14.85|
|IDG-T||Indigo Books & Music Inc||$19.18|
|JWEL-T||Jamieson Wellness Inc.||$21.08|
|L-T||Loblaw Cos Ltd||$69.26|
|MRE-T||Martinrea International Inc||$13.90|
|PTS-T||Points International Ltd||$14.92|
|PBL-T||Pollard Banknote Ltd.||$16.42|
|RTI-T||Radient Technologies Inc.||$1.27|
|RPI.UN-T||Richards Packaging Income Fund||$30.23|
|SIA-T||Sienna Senior Living Inc||$18.33|
|SOX-T||Stuart Olson Inc||$5.77|
|TSGI-T||The Stars Group Inc.||$28.17|
|VBV-T||VBI Vaccines Inc||$5.57|
|AOI-T||Africa Oil Corp||$1.48|
|BOS-T||AirBoss of America Corp||$10.27|
|AGI-T||Alamos Gold Inc||$7.89|
|AKG-T||Asanko Gold Inc||$1.03|
|AGB-T||Atlantic Gold Corp.||$1.36|
|AUP-T||Aurinia Pharmaceuticals Inc||$6.41|
|BXE-T||Bellatrix Exploration Ltd||$2.72|
|BSX-T||Belo Sun Mining Corp||$0.46|
|BTB.UN-T||BTB Real Estate Investment Trust||$4.53|
|CPX-T||Capital Power Corp||$23.46|
|CHW-T||Chesswood Group Ltd||$11.57|
|DHX.B-T||DHX Media Ltd||$3.84|
|DIR.UN-T||Dream Industrial REIT||$8.72|
|ELD-T||Eldorado Gold Corp||$1.47|
|FSZ-T||Fiera Capital Corp||$13.03|
|GEI-T||Gibson Energy Inc||$16.15|
|GMP-T||GMP Capital Inc||$2.32|
|GCG.A-T||Guardian Capital Group Ltd||$24.00|
|HLF-T||High Liner Foods Inc||$12.80|
|III-T||Imperial Metals Corp||$2.48|
|KBL-T||K-Bro Linen Inc||$38.46|
|KBL-T||K-Bro Linen Inc.||$38.46|
|KEG.UN-T||KEG Royalties Income Fund||$19.96|
|GUD-T||Knight Therapeutics Inc||$7.75|
|KPT-T||KP Tissue Inc||$13.75|
|LUG-T||Lundin Gold Inc||$4.73|
|DR-T||Medical Facilities Corp||$12.49|
|MNW-T||Mitel Networks Corp||$9.63|
|MRG.UN-T||Morguard North American Residential REIT||$14.81|
|MRT.UN-T||Morguard Real Estate Investment Trust||$13.82|
|NFI-T||New Flyer Industries Inc||$49.38|
|PEY-T||Peyto Exploration & Development Corp||$16.91|
|PZA-T||Pizza Pizza Royalty Corp||$15.68|
|RIC-T||Richmont Mines Inc||$10.90|
|RBA-T||Ritchie Bros Auctioneers Inc||$31.71|
|RSI-T||Rogers Sugar Inc||$6.04|
|SW-T||Sierra Wireless Inc||$24.36|
|SVM-T||Silvercorp Metals Inc||$2.98|
|SSRM-T||SSR Mining Inc.||$10.86|
|TGZ-T||Teranga Gold Corp||$2.39|
|RNW-T||TransAlta Renewables Inc||$13.07|
|Y-T||Yellow Pages Ltd||$6.94|