On today’s Breakouts report, there are six stocks on the positive breakouts list (stocks with positive price momentum), most of which are gold stocks, and 127 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a gold stock that may appear on the positive breakouts list in the near future, particularly if risk aversion persists –Endeavour Mining PLC (EDV-T). The share price has rallied 16 per cent over the past 10 trading sessions. Given the rapid move in the share price, the positive price momentum may pause or retreat in the near-term in order to digest these gains.
A brief outline on Endeavour is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
With its corporate head office located in London, England, Endeavour Mining is a gold producer with operations in West Africa.
Currently, four mines are in production with a fifth gold mine expected to start-up next year. Production from a new project, Lafigué, is anticipated to begin in the third-quarter of 2024. According to a 2022 Definitive Feasibility Study, average annual production at Lafigué is expected to be 203,000 ounces with an all-in sustaining cost (AISC) of US$871 per ounce and an anticipated mine life of 12.8 years.
Quarterly earnings and outlook
On Aug. 2, the company reported second-quarter financial results. Production from continuing operations came in at 268,000 ounces at an AISC of US$1,000 an ounce. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was US$253,000 Cash flow per share before changes in working capital came in at 71 US cents. During the quarter, 0.4 million shares were repurchased.
For 2023, management anticipates production will come in at between 1.06 and 1.135 million ounces at an AISC of between US$895 and US$950 an ounce. For 2025, production is expected to exceed 1.3 million ounces driven by the new Lafigué mine in Cote D’Ivoire and the expansion at the Sabodala-Massawa mine.
On the earnings call, president and chief executive officer Sebastien de Montessus remarked on anticipated production growth expected next year from two mines, “On the operational front, we are on track to meet our full year guidance for the 11th consecutive year. In line with our strategy of actively managing our portfolio to focus on higher-quality assets, we were pleased to close the sale of our non-core Boungou and Wahgnion mines during the period. The quality of our portfolio is set to further increase as our two growth projects the Sabodala-Massawa BIOX project in Senegal and the Lafigué project in Cote d’Ivoire are progressing well. Both are on budget, are on schedule to commence production in Q2 and Q3 ‘24, respectively. Alongside this year’s investment in our organic pipeline, we are pleased to continue to deliver attractive shareholder returns and have declared our H1 ‘23 dividend for $100 million. On an annual basis, this represents $25 million more than the minimum dividend commitment for the year. Given that the Sabodala-Massawa expansion and the Lafigué greenfield build are expected to both increase the group production and lower our cost base, they will further enhance our capability to reward our stakeholders. As such, our goal is to increase our shareholder returns program once our organic growth projects are completed, thereby ensuring that our efforts to unlock growth immediately benefit all our stakeholders.”
Looking ahead, on Nov. 9, third-quarter financial results will be released before the market opens followed by an earnings call with management. Before year-end, management is also expected to provide a resource update.
The company pays its shareholders a semi-annual dividend of 40 US cents per share, or 80 US cents per share on a yearly basis. This equates to a current annualized yield of approximately 3.7 per cent.
According to Bloomberg, 14 firms issued research reports after Endeavour released its second-quarter financial results, of which 12 were buy-equivalent recommendations, one was a “hold” recommendation (from ISS-EVA), and there was one “sell” recommendation (from Liberum’s Yuem Low).
The firms providing research coverage on the company are: Barclays, Berenberg, BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, ISS-EVA, Liberum, Morgan Stanley, National Bank Financial, PI Financial, Raymond James, RBC Dominion Securities, Scotiabank and Stifel.
Month-to-date, two analysts have revised their expectations lower.
- Berenberg’s Richard Hatch cut his target price to $39 from $44.
- Raymond James’ Craig Stanley lowered his target price to 36 from $38.
The consensus cash flow per share estimate is US$3.52 in 2023 and US$4.27 in 2024.
The stock is commonly valued by analysts on a price-to-net asset value basis.
According to Bloomberg, the average one-year target price is $39.82, implying the share price has 35 per cent upside potential over the next 12 months.
Year-to-date, the share price is up 2 per cent. However, over the past 10 trading sessions, the share price has rallied 16 per cent. Given the rapid rise in the share price, the stock has entered overbought territory with a relative strength index (RSI) reading of 72. Generally, an RSI reading at or above 70 reflects an overbought condition.
In terms of key resistance and support levels, the share price has a major ceiling of resistance around $36.50. In terms of downside support, there is initial support around $28, near its 200-day moving average (at $27.51). Failing that, there is strong technical support between $24 and $26.
Over the past three years, the share price has traded largely between $24 and $36 and is currently in the middle of this trading band.
ESG Risk Rating
According to Sustainalytics, the company has an environmental, social and governance (ESG) risk score of 23.1 as of Oct. 13, 2023. A risk score of between 20 and 30 reflects a “medium risk” rating.
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.