On today's TSX Breakouts report, there are 19 stocks on the positive breakouts list (stocks with positive price momentum), and 24 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a micro-cap stock that would have appeared on the positive breakouts list if its market capitalization was above the $200-million screening threshold. The share price climbed to a record high on Friday and is up 18 per cent year-to-date. This is on top of impressive price returns of approximately 28 per cent in 2017, 51 per cent in 2016 and 77 per cent in 2015. In the upcoming months, the company expects to double its capacity, providing the company with the potential to grow its earnings. The stock has a unanimous buy recommendation from five analysts. The security highlighted today is Brick Brewing Co. (BRB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Brick Brewing is Ontario's largest Canadian-owned brewery producing beers, coolers, and ciders from its operations in Kitchener-Waterloo, Ont., just outside the Greater Toronto Area. Popular brands of beer produced include Laker and Waterloo. In addition, the company has the Canadian rights to Seagram Coolers and exclusive Canadian licensing rights to Margaritaville cocktail coolers and LandShark Lager.
On Jan. 10, management announced plans to upgrade its can line, and install a new can filter and pasteurizer. This initiative will double the canning capacity to 400,000 hectolitres per year. Other benefits from this $3.5-million project are cost savings with water consumption expected to decline by 25 per cent and natural gas usage anticipated to fall by 15 per cent. The project is expected to be completed in May with the line ramping up to full capacity by the end of June. The Chief Executive Officer George Croft commented on the added value expected from the upgraded can line, "Each year we establish an operating plan that reflects the future needs of our business and our customers. This year's capital plan ensures we continue to grow our canning capacity and capabilities for both our owner brands and our co-pack customers."
The company is expected to report its fiscal 2018 year-end results next month.
The company pays its shareholders a quarterly dividend of 2 cents per share or 8 cents per share yearly. This equates to an annualized dividend yield of 1.7 per cent.
In December, management announced a 25 per cent dividend increase, increasing the dividend to its present level of 2 cents per share from 1.6 cents per share.
There are five analysts covering this micro-cap consumer staples stock with a market capitalization of $162-million, and all five analysts have 'buy' recommendations.
The firms providing research coverage on the company are as follows in alphabetical order: Acumen Capital, Cormark Securities, Laurentian Bank Securities, M Partners, and Paradigm Capital.
In February, Kyle McPhee, the analyst from Cormark Securities, lifted his target price to $4.80 from $4.40.
In January, John Chu from Laurentian Bank increased his target price to $5 from $4.70. Brian Pow from Acumen Capital raised his target price to $4.80 from $4.60. Zach Greenwald from M Partners bumped his target price up to $5.10 from $4.
The Street is anticipating revenue of $50-million in fiscal 2018 and $55-million the following year. The consensus EBITDA (earnings before interest, taxes, depreciation and amortization) estimates are $8.3-million for fiscal 2018, rising to $11.7-million in fiscal 2019. The Street is forecasting earnings per share of 8 cents in fiscal 2018 and 15 cents in fiscal 2019. The company's fiscal year-end is January 31.
Earnings forecasts have been stable. For instance, three months ago, for fiscal 2019, the consensus revenue, EBITDA, and earnings per share estimates were $55-million, $11.3-million for 2018, and 15 cents, respectively.
According to Bloomberg, the stock is trading an enterprise value-to-EBITDA multiple of 14.6 times the fiscal 2019 consensus estimate, above its three-year historical average of 12.4 times, but below its peak multiple of just over 18 times during this period.
The consensus one-year target price is $4.93, implying the share price has 7 per cent upside potential over the next 12 months. Individual target prices are as follows in numerical order: two at $4.80, two at $5.00, and $5.10.
Insider transaction activity
Sean Byrne resigned from his position as the company's Chief Financial Officer effective Feb. 8. In a news release issued on Jan. 8, he stated, "It has been my great privilege to serve as CFO at Brick Brewing. I'm proud of Brick's performance and the projects I've led, from the sale of our Waterloo and Formosa sites, to the brand licensing agreement for LandShark and Margaritaville. The company is well positioned for long term success." David Birch has assumed the position as CFO and previously worked at Anheuser Busch InBev.
Mr. Byrne is the only insider that has reported trading activity so far this year. Most recently, on Jan. 29, he sold 40,000 shares at a price per share of $3.95, leaving 162,470 shares in his account.
The stock price remains in an uptrend, marked by higher highs and higher lows. Year-to-date, the share price has rallied 18 per cent with the stock closing at a record high on Friday. In 2017, the share price rallied approximately 28 per cent, increased 51 per cent in 2016, and climbed 77 per cent in 2015.
In terms of key support and resistance levels, the stock price has initial downside support around $4, near its 50-day moving average (at $4.15). Failing that, there is support around $3.75, close to its 200-day moving average (at $3.76). In terms of upside resistance, the next ceiling of resistance is around $5.
The stock can be thinly traded, which can increase volatility in the share price. The three-month historical daily average trading volume is approximately 56,000 shares.
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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