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On today’s Breakouts report, there are 75 stocks on the positive breakouts list (with positive price momentum), and just three securities are on the negative breakouts list (with negative price momentum).

Discussed today is a dividend stock with a unanimous buy recommendation from eight analysts. Last week, the company reported a blowout quarter with its earnings soaring from spiking e-commerce activity. The security highlighted today is Intertape Polymer Group Inc. (ITP-T).

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

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.

Intertape is the second largest tape manufacturer in North America (3M holds the number one position). To illustrate its tape products, the company produces water-activated tapes, so when Amazon leaves a package at your door, the water-activated tape will stay secure on the box. In addition, companies such as Amazon are able to package their delivery boxes with printed tapes promoting products such as Amazon Prime Day.

Intertape has facilities worldwide with the majority of its plants located in North America (21 plants are located in North America), one is in Portugal, and four facilities are located in India.

According to Bloomberg, the Caisse de dépôt et placement du Québec (considered a long-term institutional investor) owns approximately 4 per cent of the shares outstanding.

Investment thesis

  • Industry leadership.
  • Improving margins. In 2020, the adjusted EBITDA margin expanded to 17.4 per cent, up 2.5 per cent from 14.9 per cent reported in 2019.
  • Benefiting from e-commerce growth.
  • Healthy balance sheet (net debt-to-EBITDA of 2.2 times, which is within management’s target of between 2 and 2.5 times).
  • Capital spending of $100-million expected in 2021. Investing $70-million to increase production capacity by 2022. On the earnings call, the CEO said, “We expect to generate more than $100 million in incremental revenue on a run rate basis by the end of 2022” from this investment.
  • CEO Greg Yull believes higher resin costs will soon ease saying on the fourth-quarter earnings call, “We expect to see some tempering on that cost front sometime in May-June”.

Quarterly earnings

Before the market opened on March 12, the company reported better-than-expected fourth-quarter financial results that sent the share price soaring 9 per cent that day.

Revenue came in at US$344-million, above the consensus estimate of US$324-million, and up 18 US per cent year-over-year. Gross margin was 25.7 per cent, up from 20.7 per cent reported during the same period last year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was US$67.7-million, beating the Street’s expectations of US$59.7-million and up 55 per cent year-over-year. The adjusted EBITDA margin was 19.7 per cent in the fourth-quarter.

On the earnings call, President and Chief Executive Officer Greg Yull said: “The growth in the ecommerce end market is a clear accelerant for the business that we believe will persist after the vaccines are successfully rolled out. E-commerce is now neck and neck with general manufacturing as the second largest end markets that we serve. In 2020, e-commerce represented 27 per cent of our end market demand and general manufacturing came in at 28 per cent, followed by food and beverage, building and construction and retail in that order. Our e-commerce business grew by more than 40 per cent in 2020, which is in line with the largest e-commerce retailer. Independent third-party reports estimate that sales through the e-commerce channel will continue to grow for many years to come at a macro level. The pandemic simply served to pull forward e-commerce adoption and establish a new base from which future growth is expected to continue.”

Dividend policy

The company pays its shareholders a quarterly dividend of 15.75 US cents per share, or 63 US cents per share yearly. This equates to an annualized dividend yield of approximately 2.7 per cent.

In November of 2020, the company announced a 7-per-cent dividend increase.

The company maintained its dividend throughout the coronavirus pandemic.

Analysts’ recommendations

This small-cap stock with a market capitalization of $1.7-billion has a unanimous buy recommendation from eight analysts.

The firms providing research coverage on the company are: BMO Nesbitt Burns, CIBC Wold Markets, Cormark Securities, iA Capital Markets, National Bank Financial, RBC Dominion Securities, Scotia Capital and TD Securities.

Revised recommendations

Thus far in March, five analysts have revised their recommendations and expectations.

  • BMO’s Stephen MacLeod hiked his target price to $35 from $29.
  • RBC’s Walter Spracklin lifted his target price to $32 from $25.
  • CIBC’s Scott Fromson increased his target price to $35.50 from $30.
  • Scotia Capital’s Michael Doumet raised his target price by $3 to a Street-high $36.
  • National Bank Financial’s Zachary Evershed upgraded his recommendation to “outperform” from “sector perform” but maintained a $30 target.

Financial forecasts

The consensus revenue estimates are US$1.315-billion in 2021, up 8 per cent from US$1.213-billion reported in 2020, and anticipated to climb to US$1.355-billion in 2022. The Street is expecting EBITDA to come in at US$221-million in 2021, up from US$211-million reported in 2020, rising to US$234-million in 2022. The consensus earnings per share estimates are US$1.61 in 2021 and US$1.77 the following year.

In the fourth-quarter earnings release, management provided 2021 revenue and EBITDA guidance. Revenue is anticipated to be between US$1.3- and US$1.4-billion (mid-point represents 11 per cent year-over-year growth) and adjusted EBITDA is expected to be between US$220-million and US$240-million (mid-point of this target range represents 9 per cent year-over-year growth).

The Street’s earnings forecasts have been rising. On Nov. 1, the Street was forecasting adjusted EBITDA of US$175-million in 2021 and adjusted earnings per share of US$1.07.

Valuation

According to Bloomberg, the shares are trading at a price-to-earnings multiple of 13.1 times the 2022 consensus estimate, relatively in-line with its five-year historical average P/E multiple of 12.4 times. On an enterprise value-to-EBITDA basis, the shares are trading at a multiple of 8 times the 2022 consensus estimate, relatively in-line with its five-year historical average of 7.7 times.

The average 12-month target price is $32.07, implying the stock has 11 per cent upside potential over the next year.

Insider transaction activity

Year-to-date, there has not been any trading activity reported by insiders.

Chart watch

Year-to-date, the share price is up 19 per cent.

On March 12, the share price spiked 9 per cent on high volume with over 900,000 shares trades, well above the three-month historical daily average trading volume of approximately 447,000 shares.

Looking at key resistance and support levels, the stock has an initial ceiling of resistance around $30. After that, there is overhead resistance between $34 and $35. Looking at the downside, there is strong technical support around $25, close to its 50-day moving average (at $24.02). Failing that, there is technical support between $22 and $23.

Monday's breakout stocks on the TSX

Positive BreakoutsMarch 12 close
ADN-TAcadian Timber Corp $18.86
AC-TAir Canada $29.72
BOS-TAirBoss of America Corp $24.55
ALC-TAlgoma Central Corp $17.00
AP-UN-TAllied Properties REIT $41.66
ALA-TAltaGas Ltd $21.13
ALS-TAltius Minerals Corp $16.73
HOT-UN-TAmerican Hotel Income Properties REIT LP $4.25
ARX-TARC Resources Ltd $8.50
ACO-X-TAtco Ltd $40.54
BMO-TBank of Montreal $110.21
BNS-TBank of Nova Scotia $79.31
BEI-UN-TBoardwalk Real Estate Investment Trust $38.71
BPF-UN-TBoston Pizza Royalties Income Fund $13.15
DOO-TBRP Inc $96.90
BTB-UN-TBTB Real Estate Investment Trust $4.31
CAR-UN-TCanadian Apartment Properties REIT $54.49
CJ-TCardinal Energy Ltd $2.29
CERV-TCervus Equipment Corp $16.10
CIA-TChampion Iron Ltd. $6.01
CSH-UN-TChartwell Retirement Residences $11.75
CHR-TChorus Aviation Inc $5.15
CJR-B-TCorus Entertainment Inc $5.97
DRT-TDIRTT Environmental Solutions $3.93
EFN-TElement Fleet Management Corp. $14.06
ERO-TEro Copper Corp. $25.06
XTC-TExco Technologies Ltd $11.44
EXE-TExtendicare Inc $7.34
FFH-TFairfax Financial Holdings Ltd $534.14
GSY-Tgoeasy Ltd $131.18
GCG-A-TGuardian Capital Group Ltd $30.07
HR-UN-TH&R Real Estate Investment Trust $14.92
HDI-THardwoods Distribution Inc $31.88
HWX-THeadwater Exploration Inc. $4.69
HRX-THeroux-Devtek Inc $16.46
HLF-THigh Liner Foods Inc $13.71
HLS-THLS Therapeutics Inc. $19.90
IMO-TImperial Oil Ltd $32.24
IPL-TInter Pipeline Ltd $18.42
IIP-UN-TInterRent REIT $14.79
ITP-TIntertape Polymer Group Inc $28.80
LIF-TLabrador Iron Ore Royalty Corp $40.30
MAL-TMagellan Aerospace Corp $11.57
MG-TMagna International Inc $115.01
MFC-TManulife Financial Corp $27.22
MI-UN-TMinto Apartment REIT $20.93
MSI-TMorneau Shepell Inc $33.69
MTL-TMullen Group Ltd $12.45
NA-TNational Bank of Canada $87.08
NEO-TNeo Performance Materials Inc. $18.59
NWC-TNorth West Co Inc $34.62
NVEI-TNuvei Corporation $82.10
ONEX-TOnex Corp $79.52
PSI-TPason Systems Inc $10.37
PPL-TPembina Pipeline Corp $38.27
PZA-TPizza Pizza Royalty Corp $10.65
POW-TPower Corp of Canada $32.85
PBH-TPremium Brands Holdings Corp $116.21
RY-TRoyal Bank of Canada $116.45
SAP-TSaputo Inc $38.39
VII-TSeven Generations Energy Ltd $9.25
SJR-B-TShaw Communications Inc $23.90
SOT-UN-TSlate Office REIT $4.44
SII-TSprott Inc $55.69
STN-TStantec Inc $52.44
STLC-TStelco Holdings Inc. $27.95
SRX-TStorm Resources Ltd. $3.06
SU-TSuncor Energy Inc $29.32
SPB-TSuperior Plus Corp $14.15
TEV-TTervita Corp. $5.65
TD-TToronto-Dominion Bank $81.65
TRZ-TTransat AT Inc $5.85
TNT-UN-TTrue North Commercial REIT $6.86
TWC-TTWC Enterprises Ltd. $18.87
VET-TVermilion Energy Inc $10.83
Negative Breakouts
DII-B-TDorel Industries Inc $12.49
PVT-XPivotree Inc. $9.15
XBC-TXebec Adsorption Inc. $5.46

Source: Bloomberg

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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