On today’s TSX Breakouts report, there are 48 stocks on the positive breakouts list (stocks with positive price momentum), of which more than one-third are gold stocks. Meanwhile, there are 18 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that may be best suited for consideration by investors with a high risk tolerance and patience. The company highlighted below is uniform provider, Unisync Corp. (UNI-T).
While it is a micro-cap stock, it has well-known clients such as Air Canada, Purolator, Petro-Canada and the Canadian Department of National Defence. The company is currently preparing to launch its uniform supply program with Alaska Airlines and WestJet.
A brief outline is provided below that may serve as a springboard for further fundamental research.
With its operational head office located in Mississauga, Unisync is a uniform manufacturer and distributor. The company has two core business segments: Unisync Group Limited (UGL), which provides design, manufacturing and distribution services to corporations, and Peerless Garments LP (Peerless), which serves government agencies. The company has reputable customers that include Air Canada, Purolator, Petro-Canada, WestJet, Alaska Airlines and the Canadian Department of National Defence.
Unisync has delivered solid top line growth over the years. To illustrate, revenue came in at $76.8-million in fiscal 2018 (the company’s fiscal year-end is Sept. 30), $65.6-million in fiscal 2017, $52.7-million in fiscal 2016, $44.8-million in fiscal 2015 and $22.3-million in fiscal 2014. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in fiscal 2018 was $10-million, $3.5-million in fiscal 2017, and less than $1-million in fiscal 2016. EBITDA margin was 13 per cent in fiscal 2018, 5 per cent in fiscal 2017 and 1 per cent in fiscal 2016. Earnings per share was 52 cents in fiscal 2018 and 5 cents in fiscal 2017.
For this year, management characterized its fiscal 2019 as a transition year. In recent months, several key developments have been announced. In Dec. 2018, management announced a major contract win becoming WestJet’s uniform provider. In Jan. 2019, the stock began trading on the Toronto Stock Exchange, graduating from the TSX Venture Exchange. In April 2019, the company announced the appointment of a new chief executive officer Matt Graham, who was previously the chief executive officer of a major Australian uniform company.
Management has guided to a recovery in revenue growth in the years ahead with the rollout of its Alaska Airlines and WestJet uniform provider programs – potential catalysts for the stock.
In the second-quarter earnings release issued on May 14, management said, “UGL’s second largest airline account, Alaska Airlines, is scheduled to officially rollout its new uniforms to its 19,000 uniformed employees starting in early fiscal 2020. UGL is responsible for all aspects of the program including manufacturing, quality, safety, inventory planning, online ordering, customer service, and warehouse and distribution. UGL will be distributing to Alaska Airlines employees from its Henderson, Nevada distribution center. UGL intends to use this location to expand its marketing efforts to other US customers in industry sectors where UGL has built a strong knowledge base, such as in food service, hospitality, private security, retail and transportation. In addition, UGL was recently selected by WestJet to take over its current uniform program and to test, manufacture and distribute a new uniform to its 10,000 uniformed employees starting in early fiscal 2021.” Another potential catalyst for the stock may be an announcement of the exercise of options under its existing contract with the Department of National Defence.
The company does not pay its shareholders a dividend.
There is one analyst that covers this micro-cap stock with a market capitalization of $67-million. In March, Jim Byrne, an analyst at Acumen Capital, launched coverage on Unisync with a “buy” recommendation. He has a target price of $4.50, implying a potential one-year return of nearly 19 per cent.
According to Bloomberg, the stock is trading at a forward enterprise value-to-EBITDA multiple of just under 8 times.
Analyst Jim Byrne is forecasting fiscal 2019 revenue be relatively unchanged year-over-year, expecting revenue of $78-million. However, he anticipates top-line growth to recover the following year, rising to $97-million in fiscal 2020. He is forecasting EBITDA to dip to $2-million in fiscal 2019 but recover to $10-million in fiscal 2020.
Insider transaction history
Year-to-date, there has not been any buying or selling activity in the public market reported by insiders.
The stock was in a multi-year uptrend until the start of this year. However, since April, the share price has been quietly firming with the 50-day moving average and 200-day moving average both rising. The stock may soon form a “Golden Cross” – a bullish technical pattern, which occurs when the 50-day moving average crosses above the 200-day moving average.
In terms of key technical resistance and support levels, the stock price has initial overhead resistance around $4. After that, there is a ceiling of resistance at $4.50, which is at its all-time closing high reached on Sept. 14, 2018. Looking at the downside, the share price is currently sitting at a strong support level, holding just above its 50-day moving average (at $3.73). Failing that, there is support around $3.50.
This consumer discretionary stock is thinly traded, which can increase volatility in the stock price. The three-month historical daily average trading volume is approximately 4,000 shares.
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.