Thursday’s TSX breakouts: This stock features an explosive earnings growth forecast for 2016

The number of stocks on the positive breakouts list (stocks with positive price momentum) continues to grow and is up to 57 companies as equity markets continue to rise, commodity prices recover, and leadership broadens. The negative breakouts list (stocks with negative price momentum) stands at just three companies.

The U.S. non-farm payroll report is a key report that investors are intensely waiting to see, which will be released Friday before the market opens.

The U.S. earnings season is largely over. According to a FactSet Earnings Insight report from Feb. 26, 96 per cent of companies in the S&P 500 index have reported fourth-quarter results, and the blended earnings decline stands at 3.3 per cent. This is the third consecutive quarter in which earnings have declined year over year.

Despite the lacklustre financial reports, markets continue to rally given the absence of negative geopolitical news, Chinese economic growth concerns are not in the front-page headlines, reduced expectations surrounding imminent additional interest rate hikes by the U.S. Federal Reserve, commodity prices have stabilized, and investor sentiment has improved for now.

One stand out during this earnings season is discussed below.

It is a stock that reported better-than-expected fourth-quarter results on Tuesday, sending the stock price up 8 per cent on Tuesday and higher by another 5 per cent on Wednesday, with high volume on both days– Maple Leaf Foods Inc. (MFI-T).

A brief outline is provided that may serve as a springboard for further fundamental research.

The company

Maple Leaf Foods manufactures food products under brands such as Maple Leaf, Maple Leaf Prime, Maple Leaf Natural Selections, Schneiders, Schneiders Country Naturals and Mina.

Fourth-quarter financial results

The company reported fourth-quarter results ahead of the Street's expectations. Adjusted earnings per share came in at 24 cents surpassing the Street's forecast of 21 cents.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) continued to improve, rising to 8.7 per cent in the fourth quarter from 7.1 per cent last quarter, and 1.5 per cent in the fourth quarter of 2014. Management sees opportunity for its margins to continue to expand and is targeting an EBITDA margin of 10 per cent.

Returning capital to shareholders

Management remains committed to its dividend policy , announcing a 12.5-per-cent dividend hike on Tuesday. The company raised its quarterly dividend to 9 cents per share from 8 cents per share, lifting the annual dividend to 36 cents per share. This equates to an annualized yield of 1.4 per cent.

In 2015, the company repurchased 8.14 million shares at a volume weighted average price of $22.44 per share.

Valuation

The stock is valued on an enterprise value-to-EBITDA basis. Valuations vary depending on analysts' assumptions. Analysts whom have updated their financial models and issued reports since the company reported its fourth-quarter results have target prices that range from a low of $24 to a high of $30. Individual target prices are as follows: $24, $26, $27, $29, and two at $30.

Analysts' Recommendations

According to Bloomberg, the stock has four recent buy recommendations and three hold recommendations with the average one-year price target amongst these analysts at $27.80, suggesting that the share price may appreciate 7 per cent over the next year.

Solid growth is anticipated over the next year for the company. The consensus EBITDA estimate is $332 million in 2016, up from $220 million in 2015. The Street's earnings per share forecast is $1.17 in 2016, up from 58 cents in 2015.

Chart Watch

The chart is attractive with the stock price in an uptrend. In addition, the stock experienced a "golden cross" last month, a bullish technical indicator, with the 50-day moving average crossing above the stock's 200-day moving average.

There is strong downside support at $23, close to its 50-day moving average, and then at $22.50, close to its 200-day moving average.

The relative strength index is at 75, suggesting the stock is in overbought territory. Generally, a reading at or above 70 indicates an overbought condition. That being said, a stock can remain in overbought territory for some time.

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 stock 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 stock 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.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of stocks in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Stocks on the positive breakouts list have displayed positive price momentum during this period. Stocks on negative breakouts list have experienced negative price momentum.