On today's TSX Breakouts report, there are 12 stocks on the positive breakouts list (stocks with positive price momentum), and 25 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appeared on the positive breakouts list earlier this week. The stock has a potential imminent catalyst and there is speculation that the company may be a future takeover target. However, a further move higher on positive news may prove to be a profit taking opportunity for investors, as the saying goes, "buy on the rumour, sell on the news." The security highlighted below is Sabina Gold & Silver Corp. (SBB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Company
While the price of gold has been under pressure, the share price of Vancouver, B.C.-based Sabina Gold & Silver has been rallying. Sabina is an exploration company with its 100 per cent owned high-grade Back River Gold Project located in Nunavut, Canada. In addition to this project, the company has a silver royalty from Glencore's Hackett River Project.
Initial project feasibility study results indicated that the Back River project has a mine life of 11.8 years with average annual production in the first eight years of 250,000 ounces. Production will primarily come from its three open pits (it also has one underground mine). Open pit production is attractive relative to underground mining given the lower associated costs.
Price momentum is positive as investors anticipate the company will receive a positive permitting decision from the Nunavut Impact Review Board (NIRB) with respect to its Back River Project. A decision from the NIRB is expected by or around July 18.
There is speculation that the company may be a takeover target by a gold producer once all permits are received.
Dividend Policy
The company does not pay its shareholders a dividend.
Analysts' Recommendations
There are eight analysts that cover this small-cap stock with a market capitalization of $470-million, of which seven analysts have 'buy' recommendations. More specifically, five analysts have 'speculative buy' recommendations and two analysts have 'buy' recommendations. There is one analyst who has a 'sector perform' recommendation (from RBC Capital Markets).
The eight firms providing research coverage on the company are as follows in alphabetical order: BMO Capital Markets, Canaccord Genuity, Cormark Securities, Echelon Wealth Partners, Haywood Securities, Industrial Alliance Securities, Paradigm Capital, and RBC Capital Markets.
Financial Forecasts
The company is still advancing its Back River Gold Project though the permitting phase. Management is targeting gold production in the year 2021.
Valuation
Many analysts value the stock on a price-to-net asset value basis. The consensus one-year target price is $2.45, implying the stock price may appreciate 17 per cent over the next 12 months. Target prices are concentrated at the mid-$2 price level, five analysts have target prices of $2.50.
Revised Recommendations
Analysts have made upward revisions to their price targets. For instance, in June, Andrew Kaip, the analyst from BMO Capital Markets, tweaked his target price, increasing it by 10 cents to $2.50, and Sam Crittenden, the analyst at RBC Capital Markets, dramatically changed his target price, lifting it to $2.25 from $1.25.
Insider Transaction Activities
Looking back to the beginning of June, there have been no reported transactions by insiders.
Chart Watch
The stock has been in an uptrend since the beginning of the year. Year-to-date, the stock price has more than doubled in value, rising 114 per cent. Despite this stellar move, the share price is not in overbought territory. The relative strength index is at 64. Generally, a reading at or above 70 indicated an overbought condition.
In terms of key resistance and support levels, there is downside support around $1.85, close to its 50-day moving average (at $1.86). Failing that, there is support around $1.50, near its 200-day moving average (at $1.45). Looking at the upside, the share price could potentially return to the $3 price level.
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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, 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 indices 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.
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