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On today’s TSX Breakouts report, there are 10 stocks on the positive breakouts list (stocks with positive price momentum), and 52 stocks are on the negative breakouts list (stocks with negative price momentum).

Rising global economic uncertainty is driving investors into safe haven assets. The positive breakouts list is dominated by gold stocks, one of which is discussed today - Osisko Gold Royalties Ltd. (OR-T). In Sept., Osisko’s share price rallied nearly 11 per cent, making it one of the best performing stocks in the S&P/TSX composite index last month.

A brief outline on Osisko is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.

The company

Montreal-based Osisko is a precious metal royalty company that holds a portfolio of over 165 royalties, streams and precious metal offtakes concentrated in North America.

The company is dual-listed, trading on both the Toronto Stock Exchange and the New York Stock Exchange under the ticker OR.

According to Bloomberg, the Caisse de dépột et placement du Québec (CDPQ), an institutional investor with a longer-term investment horizon, owns 7 per cent of the shares outstanding.

Investment thesis

  • Gold exposure without direct production and development costs. In 2021, 76 per cent of GEO’s (gold equivalent ounces) stemmed from gold, 21 per cent from silver and the balance, 3 per cent, from other commodities.
  • Partnerships with established gold producers including Newmont, Agnico Eagle Mines and Yamana Gold.
  • Exposure to regions with low geopolitical risk. In 2021, 79 per cent of GEO’s earned stemmed from North America.
  • Diversified cash flow with over 165 royalties, streams and offtakes.
  • Solid growth anticipated. Management targets 2022 GEO’s of between 90,000 and 95,000 rising to between 130,000 and 140,000 by 2026.
  • Attractive valuation relative to its peers.
  • Reliable dividend. Quarterly dividend was maintained throughout the COVID pandemic.
  • Perceived safe haven during times of heighten macroeconomic uncertainty.

Returning capital to shareholders

The company pays its shareholders a quarterly dividend of 5.5 cents per share or 22 cents per share yearly, equating to a current annualized yield of 1.6 per cent.

In July, the company repurchased 659,520 shares at an average price per share of $12.65.

Quarterly earnings results

After the market closed on Aug. 9, the company reported second quarter financial results that beat expectations. Revenue from the royalty and streaming business totaled $51.5-million and adjusted earnings per share came in at 14 cents, ahead of the consensus estimate of 8 cents per share. Osisko earned 22,243 in GEO’s (gold equivalent ounces). On July 12, the company pre-announced its second-quarter revenue from its royalties and streams as well as deliveries.

Analysts’ recommendations

With a market capitalization of $2.6-billion, this stock is well covered by the Street. According to Bloomberg, there are 12 analysts covering this company of which 11 analysts have buy-equivalent recommendations and one analyst (BMO’s Jackie Przybylowski) has a “market perform” recommendation.

The 12 firms providing research coverage on the company are: BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Cormark Securities, Eight Capital, Haywood Securities, National Bank Financial, Raymond James, RBC Dominion Securities, Scotiabank, Stifel Canada and TD Securities.

Revised recommendations

In September, two analysts tweaked their target prices.

  • BMO’s Jackie Przybylowski trimmed her target price by $1 to $18, which is the low on the Street. She has maintained a “market perform” recommendation on the stock since May 2020.
  • Haywood’s Kerry Smith tweaked his target price to $25.75 from $25.50, which is the high on the Street.

Financial forecasts

According to Bloomberg, the Street is forecasting solid growth for the company with cash flow per share expected to come in at 76 cents in 2022 and 99 cents per share in 2023. The consensus earnings per share estimates are 35 cents in 2022 and 48 cents in the following year.

Over recent months, estimates have moderated. Three months ago, the Street was forecasting cash flow per share of 87 cents in 2022 and $1.06 in 2023. The consensus earnings per share estimates were 42 cents for 2022 and 55 cents for 2023.

Valuation

Analysts commonly value the stock on a price-to-net asset value (NAV) basis, as well as on a price-to-cash flow (P/CF) basis. According to Refinitiv, the stock is trading at a price/NAV of 1.1 times.

According to Bloomberg, the average one-year target price is $21.53, implying there is 53 per cent upside in the share price over the next 12 months. Target prices range from a low of $18 to a high of $25.75. Individual target prices are as follows in numerical order: $18 (from BMO’s Jackie Przybylowski), $19.50, two at $20, US $15 (which equates to just over Cdn $20 currently), three at $21, $23, $24, $25 and $25.75 (from Haywood’s Kerry Smith).

Insider transaction activity

In the third-quarter, only one relatively small trade was reported by an insider.

On Aug. 24, vice-president, corporate development Iain Farmer, sold 1,510 shares at a price per share of $13.259, reducing this particular account’s position to 16,751 shares. Proceeds from the sale exceeded $20,000, not including trading fees.

Chart watch

Over the past month, gold stocks surged while the broader market declined. In Sept., shares of Osisko Mining rallied 10.7 per cent, making it the 18th best performing stock out of the 236 stocks in the S&P/TSX composite index. In contrast, the S&P/TSX Index declined 4.6 per cent.

Year-to-date, Osisko’s share price is down 9 per cent, outperforming the S&P/TSX composite index, which is down 13 per cent.

Over the past two years, the share price has traded largely between $12 and $18 and is rebounding off the lower end of this trading band.

In terms of key technical support and resistance levels, there is initial downside support around $12. Failing that, there is support around $10. The stock has a major ceiling of resistance between $17 and $18.50.

ESG Risk Rating

According to Sustainalytics, Osisko Gold Royalties has an ESG (environmental, social and governance) risk rating of 14.9 as of June 15, 2022. A rating of between 10 and 20 reflects “low” risk.

POSITIVE BREAKOUTSSept. 30 close
ABST-TAbsolute Software Corp $15.98
ORA-TAura Minerals Inc. $9.03
HTL-XHamilton Thorne Ltd. $1.70
K-TKinross Gold Corp $5.23
NGD-TNew Gold Inc $1.23
OR-TOsisko Gold Royalties Ltd $14.07
OSK-TOsisko Mining Inc. $3.09
TH-TTheratechnologies Inc $3.28
TFPM-TTriple Flag Precious Metals Corp. $17.46
WPM-TWheaton Precious Metals Corp. $44.73
NEGATIVE BREAKOUTS
BOS-TAirBoss of America Corp $8.35
AQN-TAlgonquin Power & Utilities Corp $15.09
ALA-TAltaGas Ltd $26.45
AI-TAtrium Mortgage Investment Corp $10.60
BDGI-TBadger Infrastruture Solutions Ltd. $28.15
BNS-TBank of Nova Scotia $65.70
BCE-TBCE Inc $57.92
BDT-TBird Construction Inc $5.96
BB-TBlackBerry Ltd $6.51
BRAG-TBragg Gaming Group Inc. $5.57
CNE-TCanacol Energy Ltd $1.87
GOOS-TCanada Goose Holdings Inc. $21.02
CTC-A-TCanadian Tire Corp Ltd $147.05
CU-TCanadian Utilities Ltd $35.93
CRRX-TCareRx Corp. $3.01
CJT-TCargojet Inc $111.60
CAS-TCascades Inc $8.04
CGO-TCogeco Inc $55.10
DNTL-Tdentalcorp Holdings Ltd. $7.95
DII/B-TDorel Industries Inc $4.75
ECN-TECN Capital Corp. $4.57
EMA-TEmera Inc $55.89
EMP-A-TEmpire Co Ltd $34.36
ET-TEvertz Technologies Ltd $12.28
EIF-TExchange Income Corp $41.44
XTC-TExco Technologies Ltd $7.74
MHC-U-TFlagship Communities REIT $14.99
FTS-TFortis Inc $52.48
WN-TGeorge Weston Ltd $144.63
GEI-TGibson Energy Inc $21.97
GWR-TGlobal Water Resources Inc. $16.30
GWO-TGreat-West Lifeco Inc $29.82
GUD-TKnight Therapeutics Inc $5.31
LB-TLaurentian Bank of Canada $29.62
L-TLoblaw Cos Ltd $109.38
MG-TMagna International Inc $65.53
NFI-TNew Flyer Industries Inc $12.14
POW-TPower Corp of Canada $31.13
PBH-TPremium Brands Holdings Corp $85.00
PYR-TPyroGenesis Canada Inc. $1.51
QTRH-TQuarterhill Inc. $1.64
SYZ-TSylogist Ltd. $5.43
TRP-TTC Energy Corp. $55.64
T-TTELUS Corp $27.43
LEV-TThe Lion Electric Company $3.92
TWM-TTidewater Midstream and Infrastructure Ltd. $0.99
RNW-TTransAlta Renewables Inc $14.62
TRZ-TTransat AT Inc $2.76
TC-TTucows Inc. $51.90
VLN-TVelan Inc $6.04
WPRT-TWestport Fuel Systems Inc. $1.21
Y-TYellow Pages Ltd $12.45

Source: Bloomberg and The Globe and Mail

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 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.

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