In Canada, the economic calendar is light today.
Watch for housing data as the Teranet-National Bank home price index figures from January get released.
In terms of earnings releases for Canadian stocks, CAE Inc. (CAE-T), Keyera Corp. (KEY-T) and Pan American Silver Corp. (PAAS-T) are all scheduled to release their quarterly results.
In the U.S., inflation data will be announced, and U.S. Federal Reserve chair Janet Yellen will be speaking before Congress, providing the semi-annual monetary policy report.
On the commodity front, the price of oil is firmer, rising above $53 (U.S.) a barrel. Meanwhile, the price of natural gas futures continues to slide after falling below the $3 (U.S.) mark on Monday. The price of gold is up modestly, less than 1 per cent.
Briefly recapping Monday's stock market returns, major North American equity markets extended their gains, closing at all-time highs.
In the U.S., the Dow Jones Industrial Average rallied 0.70 per cent, and both the S&P 500 index and Nasdaq composite index advanced 0.52 per cent.
Turning to Canada, the S&P/TSX composite index increased 27 points, or 0.17 per cent. There were 117 securities in the TSX Index that advanced, 128 securities declined in value, and four stocks closed the day unchanged.
The TSX Index is up 3.07 per cent year to date.
On today's TSX Breakouts report, there are 62 stocks on the positive breakouts list (stocks with positive price momentum), and just six stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today remains in an uptrend and may appear on the positive breakouts list in the upcoming months. The shares appear to be under accumulation with more than double the historical daily average trading volume trading on Monday. The company is Aphria Inc. (APH–X).
Given controversy surrounding the topic of legalized recreational marijuana, this security may be best suited for consideration by growth investors with a high risk tolerance.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Leamington, Ontario-based Aphria is a producer and marketer of medical marijuana products. The company generates revenue through two channels, retail and wholesale. This is a company with significant upside revenue growth potential given potential legislative changes.
On Feb. 6, the company announced a $50-million bought deal financing. Proceeds will be used to fund its recently announced Part IV expansion project. On Jan. 16, the company announced that its Board of Directors approved a $137-million capital project. This expansion project is a massive plan expected to propel their annual harvest capacity up to 70,000 kilograms, up from the company's present annual harvest capacity of approximately 2,800 kilograms.
One key competitive advantage for the company is its low cost structure given that the company uses greenhouses, reducing their power consumption. Today, Aphria has a cash cost of approximately $1.30 per gram, and when you add depreciation and packaging to the cash cost, it rises to roughly $1.80 per gram. Management anticipates cash costs will fall to approximately $1.50 per gram with the company's Part III expansion project, and decline even further with the completion of its Part IV project.
Earlier this month, the company received conditional approval from the Toronto Stock Exchange to graduate to the big board, the TSX, from the TSX Venture Exchange. Final approval is expected to be received on or before the deadline date of May 3.
The company's fiscal year-end is May 31.
Dividend policy
The company is focused on growth and currently does not pay its shareholders a dividend.
Financial forecasts
The Street is forecasting revenue of $20.5-million in fiscal 2017, rising to $43.7-million in fiscal 2018, and nearly tripling to $127.3-million the following fiscal year. Earnings before interest, taxes, depreciation and amortization (EBITDA) is forecast by the Street to come in at $4.5-million in fiscal 2017, $13.9-million in fiscal 2018, and $47.3-million in fiscal 2019. Finally, the consensus earnings per share estimates are 2 cents in fiscal 2017, 8 cents in fiscal 2018, and 27 cents in fiscal 2019.
Over the past six months, forecasts have been relatively stable with minor revisions. In August 2016, the consensus revenue estimates were $20.9-million for fiscal 2017 and $41.6-million for fiscal 2018. The consensus EBITDA estimates were $5.1-million in fiscal 2017 and $15-million the following fiscal year.
In comparison, revenue for industry peer, Canopy Growth Corp. (WEED-T), is forecast by the Street to be $45.6-million in fiscal 2017, $130-million in fiscal 2018, and $324-million in fiscal 2019. The consensus EBITDA forecasts are a $2-million loss in fiscal 2017, a profit of $15-million in fiscal 2018, and a gain of $45.8-million in fiscal 2019.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-sales multiples of 12.8 times the fiscal 2018 consensus estimate and 4.4 times the fiscal 2019 consensus estimate.
The consensus one-year target price is $6.56, suggesting a potential price return of 13 per cent over the next 12 months.
Individual target prices range from a low of $5 (at GMP) to a high of $7.50 (at Eight Capital). Individual target prices are as follows in numerical order: $5, $6, $6.40, $6.50, $7.10, $7.40, and $7.50.
Analysts' recommendations
This small cap stock, with a market capitalization of $650-million, is covered by seven analysts, four analysts have 'buy' recommendations, two analysts have 'speculative buy' recommendations, and one analyst has a 'hold' recommendation.
The seven firms providing research coverage are as follows in alphabetical order: Clarus Securities, Cormark Securities, Eight Capital, GMP, M Partners, Mackie Research Capital, and PI Financial.
Revised target prices
Analysts have been revising their target prices higher. This month, Daniel Pearlstein, the analyst from Eight Capital, bumped his target price to $7.50 from $6. In January, Mason Brown, the analyst at M Partners, increased his target price to $7.10 from $6.10. In addition, Martin Landry, the analyst from GMP, revised his target price to $5 from $4.25, and PI Financial's analyst, Jason Zandberg, raised his target price by 50 cents to $6.
Insider transaction activity
Last month, co-founder, Cole Cacciavillani, sold 50,000 shares at a price of $5.58 per share on Jan. 23 but maintains a significant ownership position. On the flip side, Arlene Dickinson, board member who well-known for her stint on CBC's Dragons' Den, purchased 4,400 shares at a price of $5.53 per share on Jan. 19.
Chart watch
The stock's chart is attractive with the share price remaining in an uptrend. This sector remains an area under accumulation by investors with the road to legalize recreational marijuana still moving forward. Year to date, Aphria's share price is up 15 per cent.
On Monday, the stock price rallied 5 per cent on high volume. Over 4-million shares traded, well above the two-month historical daily average trading volume of approximately 1.6-million shares.
Shares of an industry peer, Canopy Growth Corp. (WEED-T) also increased 5 per cent on Monday on high volume with over 10-million shares traded, above the two-month historical daily average trading volume of approximately 3.3-million shares. Shareholders of Canopy Growth has seen the stock price soar 42 per cent year-to-date.
Initial overhead resistance appears to be around $6, and after that around $6.50. Initial downside support appears to exist around $5. Failing that, there is support at $4.50 and then at $4.
The relative strength index is at 64, suggesting the share are in neutral territory, neither overbought nor oversold.
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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.