On today's TSX Breakouts report, there are 34 stocks on the positive breakouts list (stocks with positive price momentum), and 19 stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today is a small-cap stock with a market capitalization of $1.25-billion that appears on the positive breakouts list. The company offers investors an attractive dividend yield of over 3 per cent with a dividend that is paid in U.S. dollars. The company is Intertape Polymer Group Inc. (ITP-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
With headquarters in Montreal and Sarasota, Fla., Intertape develops and manufactures products, such as carton sealing tapes and industrial and specialty tapes and fabrics, used in industrial, automotive, and aerospace applications. The company has a total of 15 manufacturing facilities, 13 are located in North America (most are located in the United States), one is in Portugal, and one is in India.
In terms of geographical revenue breakdown, in 2016, 83 per cent of the company's total revenue was from the U.S., 7 per cent was from Canada, with balance from other regions. In terms of product composition, in 2016, 67 per cent of revenue was from tapes, 19 per cent from films, and 14 per cent of revenues were from woven and other products. Return on equity was 22.6 per cent in 2016.
Before the market opened on Nov. 13, the company reported better-than-expected third-quarter financial results (financial figures are reported in U.S. dollars). Revenue was $243-million, up 18 per cent year-over-year and ahead of the consensus estimate of $230-million. Gross margin declined to 20.4 per cent from 22.5 per cent during the same period last year due to the dilutive impact of the company's recent acquisition of Canadian Technical Tape Ltd., which was completed in July.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $32.4-million, above the consensus estimate of $30.4-million, and up 16 per cent year-over-year. Earnings per share was 32 cents, surpassing the Street's expectations of 24 cents.
The share price rallied 14 per cent that day on high volume with over 1.6 million shares traded, well above the three-month historical daily average trading volume of approximately 460,000 shares.
On the earnings call, Chief Executive Officer and President Gregory Yull said, "We feel we are turning a corner in the performance of our Powerband acquisition and advancing well in the integration of our other completed M&A (merger and acquisition) deals. We believe there are many other good organic and inorganic opportunities to take advantage of."
If management can deliver on these stated objectives, the stock price may continue to recover as there is room for the multiple (valuation) to expand.
Returning capital to shareholders
The company pays investors a quarterly dividend in U.S. dollars of 14 cents per share, or 56 cents per share yearly. This equates to an annualized dividend yield of over 3 per cent. The company has maintained its dividend at this level since September 2016.
The company has been active in its share buyback program. Since July 17th, the company has repurchased more than 450,000 shares.
Financial forecasts
The company reports its financial results in U.S. dollars. The Street is forecasting EBITDA to come in at $127-million in 2017, rising over 14 per cent to $145.5-million in 2018, and climbing to $157.5-million in 2019. Management has provided guidance, anticipating adjusted EBITDA of between $126-million and $130-million in 2017. The consensus earnings per share (EPS) estimates are $1.00 in 2017, $1.10 in 2018, and $1.23 in 2019.
Since the beginning of the year, revenue estimates have steadily increased. However, EBITDA and EPS forecasts have been more volatile. Three months ago, the Street was forecasting EBITDA of $123-million in 2017 and $147-million the following year. The consensus EPS forecasts were 92 cents in 2017 and $1.14 in 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 8.8 times the 2018 consensus estimate, above with its three-year historical average multiple of 7.9 times. On a price-to-earnings basis, the stock is trading at a multiple of over 15 times the 2018 consensus estimate, above with its three-year historical average multiple of approximately 13.5 times.
The consensus one-year target price is $25.83, suggesting a potential price return of nearly 22 per cent over the next 12 months. If you include the dividend yield, the potential total return is forecast to be approximately 25 per cent.
Individual target prices range from a low of $24 (at Cormark Securities) to a high of $27 (at Industrial Alliance Securities as well as TD Securities). Individual target prices are as follows in numerical order: $24, $25, two at $26, and two at $27.
Analysts' Recommendations
After the company reported its third-quarter results, six analysts issued research reports, all of which were buy recommendations.
The six analysts issuing recent research reports are from the following firms in alphabetical order: Cormark Securities, GMP, Industrial Alliance Securities, RBC Capital Markets, Scotia Capital, and TD Securities.
Revised Target Prices
After the company reported its third-quarter financial results, one analyst tweaked his target price. Michael Doumet, the analyst at Scotia Capital, increased his target price to $27 from $26.
Insider transaction activity
The most recent trades reported by an insider occurred in September. Between Sept. 21 and Sept. 29, the company's Chief Financial Officer Jeffrey Crystal purchased a total of 14,500 shares at an average price per share above $18, increasing his portfolio's holdings to 19,592 shares.
Chart watch
The stock has been a laggard, underperforming the S&P/TSX composite index and its respective sector (the Materials sector). Year-to-date, the share price is down nearly 16 per cent.
In terms of key resistance and support levels, there is initial overhead resistance around $22, near its 200-day moving average (at $22.01). There is a major ceiling of resistance around $25. In terms of the downside, there is initial support around $19, near its 50-day moving average (at $19.22) and then at $18. Failing that, there is major support around $15.
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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, 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.