On today's TSX Breakouts report, there are 16 stocks on the positive breakouts list (stocks with positive price momentum), and 50 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a company that we have not featured in the Breakouts report since November 2016. Since then, the share price is relatively unchanged. The company is a growth by acquisition play and just last month, it announced its latest acquisition. The stock has 13 buy recommendations and a total return of 24 per cent is expected over the next year. The stock highlighted today is Alimentation Couche-Tard Inc. (ATD.B-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Company
Québec-based, Alimentation Couche-Tard is a leading convenience store operator. As at June 30, the company had a network of 9,424 convenience stores in North America and 2,754 stores in Europe operating under banners such as Circle K and Couche-Tard. The company also has more than 1,700 stores operated internationally under licensing agreements.
The company's growth has been fueled by acquisitions. Last month, the company announced it had signed an agreement to acquire Holiday Stationstores Inc., a convenience store operator with 522 locations across 10 Upper Midwest U.S. states: Minnesota, Wisconsin, Washington, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and Alaska. This transaction will give the company exposure to six new U.S. states. The purchase is anticipated to be completed in the fourth quarter of fiscal 2018. The company's fiscal year-end is at the end of April.
Before the market opened on July 12, the company reported its fourth quarter fiscal 2017 financial results that were better-than-expected sending the share price rallying nearly 4 per cent that day. The company reported adjusted earnings per share of 52 cents (U.S.), beating the consensus estimate of 46 cents.
The company is expected to report its first quarter fiscal 2018 financial results at the end of the month. The Street is forecasting earnings per share of 67 cents (U.S.).
Dividend Policy
The company pays shareholders a quarterly dividend of 9 cents (Cdn.) per share, or 36 cents on a yearly basis. This equates to an annualized dividend yield of 0.6 per cent.
The company has steadily increased its dividend over the years with its most recent dividend hike announced in November 2016.
Analysts' Recommendations
There are 14 analysts that cover this consumer staples stock, of which 13 analysts have buy recommendations and one analyst (from EVA Dimensions) has a 'hold' recommendation.
The 14 firms that provide research coverage on the company are as follows in alphabetical order: Accountability Research, Barclays, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Desjardins Securities, Dundee Securities, EVA Dimensions, GMP, Macquarie, National Bank Financial, RBC Capital Markets, Scotia Capital, and TD Securities.
Financial Forecasts
All financial figures are reported in U.S. dollars.
The consensus earnings per share estimates are $2.70 in fiscal 2018, rising over 14 per cent to $3.09 in fiscal 2019.
Earnings estimates have been rising. For instance, three months ago, the Street was forecasting earnings per share of $2.66 for fiscal 2018 and $2.98 for fiscal 2019.
Valuation
According to Bloomberg, the stock is trading at price-to-earnings (P/E) multiple of 15.7 times the fiscal 2019 consensus earnings estimate. This valuation is below the stock's historical three-year average P/E multiple of 18 times, and near its trough multiple of 15 times during this time period, implying there may be limited downside risk.
According to Bloomberg, the one-year consensus target price is $75.69, suggesting there is over 23 per cent upside in the share price over the next 12 months. Target prices range from a low of $72 to a high of $81. Individual target prices provided by 13 firms are as follows in numerical order: two at $72, two at $73, two at $74, $75, two at $77, two at $78, $80, and $81.
Revised Recommendations
Last month, numerous analysts made minor revisions to their target prices, most of which were positive changes. For instance, Michael Van Aelst, the analyst from TD Securities raised his target price to $78 from $75. Patricia Baker from Scotia Capital took her target price up to $77 from $76. Irene Nattel from RBC Capital Market took her target price up by $1 to $80. Tal Woolley from Eight Capital lifted his target price by $2 to $77. Martin Landry from GMP increased his target price to $81 (the high on the Street) from $78. Jim Durran from Barclays raised his target price by $2 to $74. Taking an opposing view, Keith Howlett from Desjardins Securities trimmed his target price to $74 from $76.
Insider Transactions
On August 15, Sylvain Aubry, a senior officer of the company, purchased 1,496 shares at an average price per share of $61.04, increasing the portfolio's position to 2,868 shares.
Chart Watch
Year-to-date, the stock is up by just 0.5 per cent.
Over the past two years, the share price has been locked-in a trading range, trading principally between $55 and $65, and is currently trading in the middle of this band.
In terms of key support and resistance levels, there is initial downside support around $58. Failing that, there is support between $52 and $55, and major support at $50. The stock has overhead resistance around $65, and there is a major ceiling of resistance just below $70.
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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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