Tuesday’s TSX breakouts: This health care stock has a projected average return of 59%

On Monday, the S&P/TSX composite index officially recovered all of its losses post the Brexit decision announcement.

The TSX index gained 194 points, or 1.38 per cent, and is now up 9.6 per cent year-to-date.

Today, the TSX Index appears poised to give back some of these gains. The positive price momentum may pause ahead of the U.S. non-farm payroll data that will be released this Friday before the market opens.

On today's breakouts report, there are 82 securities on the positive breakouts list (stocks with positive price momentum). Meanwhile, the list of securities on the negative breakouts list (stocks with negative price momentum) stands at just three stocks.

Discussed today is a health care stock that soared over 30 per cent on Monday, and several analysts believe there is still plenty of upside left. The stock is TSO3 Inc. (TOS-T).

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

The company

TSO3 develops low temperature sterilization systems designed to eliminate microbial contaminants from medical devices. Its sterilization process is particularly useful for heat sensitive devices and devices that cannot withstand harsh decontamination methods.

Last December, the company announced that it filed completed studies with the U.S. Food and Drug Administration (FDA), seeking approval for its STERIZONE VP4 Sterilizer for expanded applications. The company's STERIZONE VP4 Sterilizer can sterilize multiple devices during a single cycle, and handles loads of up to 75 pounds. The company sought approval for sterilization of flexible endoscopes and other complex medical devices used in minimally invasive surgical procedure aimed at widening the company's target market significantly.

On July 4, the company announced that the U.S. FDA cleared its STREIZONE VP4 Sterilizer for expanded indications for use.

Dividend policy

The company does not pay shareholders a dividend.

Analysts' recommendations

According to Bloomberg, the one-year price target is $4.69, which is based on four buy recommendations. There are no hold nor sell recommendations. This suggests the share price may appreciate 59 per cent over the next 12 months. That being said, price target vary widely. Individual price targets are as follows: $3.25, $4, $5.25, and $6.25.

According to Bloomberg, the Street is forecasting revenue of $13.5-million (U.S.) in 2016, $28-million in 2017, and then $50.5-million in 2018. The consensus earnings before interest, taxes, depreciation and amortization (EBITDA) forecast is a loss of $2.1-million in 2016, $3.3-million in 2017, and jumping to $11.5-million in 2018. The Street is forecasting earnings per share to be roughly break-even in 2017, rising to 9 cents in 2018.

Chart watch

The stock's chart is positive. The share price of this small-cap stock, with a market capitalization of nearly $270-million (Canadian), has been an uptrend since mid-2014. Year to date, the stock price has rallied 32 per cent, due to the steep rally in the share price on Monday.

On Monday, the share price advanced over 30 per cent on heavy volume. Over 2.2 million share traded, well above the two-month daily average volume of just over 206,000 shares.

The stock is approaching overhead resistance at $3. There is large resistance between $3.75 and $3.85.

The stock has downside support around $2.20, near its 50-day moving average (at $2.23), and at $2, which is close to its 200-day moving average (at $2.01).

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.

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 securities principally from 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. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.