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On today’s TSX Breakouts report, there are 42 stocks on the positive breakouts list (stocks with positive price momentum), and 10 stocks are on the negative breakouts list (stocks with negative price momentum).

The security highlighted today appears on the positive breakouts list. It has delivered positive returns to unitholders over the past 11 consecutive years, and remains on track to provide a gain to investors for yet another year. Year-to-date, the unit price is up 13 per cent. Analysts have positive outlooks on the security with 11 buy recommendations. Discussed below is Boyd Group Income Fund (BYD.UN-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

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The Fund

Winnipeg-based Boyd Group operates a network of non-franchised collision repair centers across North America, mostly in the U.S., under banners such as Boyd Autobody & Glass, and Gerber Collision & Glass. Boyd also operates auto glass shops across 31 U.S. states under banners such as Glass America, Auto Glass Service, and Auto Glass Authority. The majority of Boyd’s revenue stems from the U.S., with less than 15 per cent of sales from Canada. Boyd is the one of the largest retail auto glass operator in the U.S. Furthermore, over 90 per cent of its revenue is generated through insurance carriers such as State Farm Insurance, Allstate, and Geico.

Before the market opened on May 15, the Fund reported better-than-expected first-quarter financial results. Sales came in at $453.3-million, up 19.6 per cent year-over-year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $42.1-million, up 28.5 per cent year-over-year, surpassing the consensus estimate of $40.9-million. Adjusted net earnings per unit was $1.06, well above the Street’s expectations of 97 cents per unit. Also positive, same-store sales grew 4 per cent. Overall, Boyd delivered solid operational results. The unit price rallied 7 per cent over the next two trading sessions.

Management remains focused and committed to doubling the size of its business over a five-year period ending in 2020, equating to an average annual growth rate of 15 per cent. The company operates in a highly fragmented industry, allowing Boyd to grow through acquisitions. In 2017, the company added 105 locations and during the first quarter Boyd added five locations. Subsequent to the first quarter, management indicated on the earnings call that they added five more locations.

On the conference call, management highlighted several challenges for investors to be mindful of for the second quarter noting the tough year-over-year comparison, currency headwinds, and the ongoing shortage of technicians.

Chief executive officer Brock Bulbuck provided clarity on the currency sensitively stating, “We also have a meaningful foreign currency headwind in that the average U.S. dollar conversion rate thus far in Q2 (the second quarter) is approximately $1.28 whereas in Q2 2017, it was approximately $1.35. At our current size, every 1-cent decline in the U.S. conversion rate translates into approximately $1.1 million reduced adjusted EBITDA annually or $275,000 quarterly.”

He also commented on the technician staff shortage, “Looking ahead to Q2 and through the rest of 2018, we expect that the technician shortage will continue to be a challenge. We are optimistic about the programs that we have put in place, which focus on recruitment, retention and apprenticeship. However, as we have said in the past, these programs will take time to mature, but we do believe that these initiatives will prove successful in the long term.”

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Distribution policy

Boyd pays its unitholders a monthly distribution of 4.4 cents per trust unit, or 52.8 cents per unit on a yearly basis. This equates to an annualized yield of 0.5 per cent. In November of every year, going back to 2011, management has announced an increase to its monthly distribution. Annualized dividends have increased by 13 per cent since 2012.

The payout ratio is very conservative, suggesting the distribution is sustainable. In 2017, the payout ratio based on adjusted distributable cash was 10 per cent.

Financial forecasts

The Street is forecasting EBITDA of $176-million in 2018, up from $146-million reported in 2017, and expected to rise to $205-million in 2019. Earnings per unit is anticipated to come in at $4.35 in 2018, up from $3.18 reported in 2017, and rise to $5.13 in 2019.

In recent months, financial expectations have been relatively steady for EBITDA but with positive revisions to net earnings per unit forecasts. For instance, three months ago, the consensus EBITDA estimates were $177-million for 2018 and $205-million for 2019, and earnings per unit expectations were $4 for 2018 and $4.86 for the following year.

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Analysts’ recommendations

The Fund is well covered on the Street. Since reporting their first-quarter earnings results, 12 analysts have issued research reports, of which 11 were buy recommendations and one analyst (Steven Arthur from RBC Capital Markets) maintained a “sector perform” recommendation.

The firms providing recent research coverage on Boyd are as follows in alphabetical order: AltaCorp Capital, BMO Capital Markets, CIBC World Markets, Cormark Securities, GMP Securities, Jefferies, Laurentian Bank Securities, Macquarie, National Bank Financial, Raymond James, RBC Capital Markets, and TD Securities.

Revised recommendations

Earlier this month, four analysts revised their expectations – all higher.

Jonathan Lamers, the analyst from BMO Capital Markets, raised his target price to $126 from $120. Leon Aghazarian from National Bank Financial took his target price up to $125 from $120. Michael Glen, the analyst at Macquarie, increased his target price to $126 from $116. Elizabeth Johnston from Laurentian Bank Securities lifted her target price by $3 to $123.

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According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 11.9 times the 2019 consensus estimate, above with its three-year historical average multiple of 10.4 times, and approaching its peak multiple of 12.7 times during this time period.

The consensus one-year target price is $122.82, suggesting the Fund may deliver a price return of nearly 8 per cent over the next 12 months.

Target prices range from a low of $105 (at RBC Capital Markets) to a high of $129 (at GMP Securities). Individual target prices are as follows in numerical order: $105, $120, two at $122, $123, four at $125, two at $126, and $129.

Insider transaction activity

Year-to-date, two insiders have reported transactions in the public market.

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Between March 26 and March 29, president and chief operating officer Tim O’Day sold a total of 75,000 units at an average price per unit of approximately $103.32, reducing his portfolio’s position to 53,174 units.

On March 28, President of Canadian Operations Eric Danberg sold 3,000 units, trimming his account’s holdings to 22,021 units.

Chart watch

Pull up a long-term chart and you will see that the stock chart is quite attractive. Boyd’s unit price remains in a multi-year uptrend. Year-to-date, the unit price has rallied 13 per cent. Looking back, the unit price rallied 18 per cent in 2017, and increased 29 per cent in 2016. In 2015 and 2014, the unit price rose 39 per cent and 44 per cent, respectively.

In the near-term, the positive price momentum may be due for a pause. The relative strength index (RSI) suggests that the stock is in overbought territory with an RSI reading of 70. Generally, a reading of 70 or higher reflects an overbought condition.

In terms of key resistance and support levels, there is initial overhead resistance around $115, and after that around $120. Looking at the downside, there is initial support between $105 and $107, near its 50-day moving average (at $107.85). Failing that, there is major support around $100, close to its 200-day moving average (at $100.34).

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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, 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.

Positive BreakoutsMay 23 close
ATA-TATS Automation Tooling Systems Inc $20.39
BYD.UN-TBoyd Group Income Fund $114.22
BEP.UN-TBrookfield Renewable Energy Partners LP $40.68
DOO-TBRP Inc $55.64
CAE-TCAE Inc $25.17
CAR.UN-TCanadian Apartment Properties REIT $40.38
CNR-TCanadian National Railway Co $107.90
DRT-TDIRTT Environmental Solutions $6.54
DRG.UN-TDream Global REIT $14.73
D.UN-TDream Office REIT $24.95
ECN-TECN Capital Corp. $3.80
ELD-TEldorado Gold Corp $1.48
ERO-TERO Copper Corp. $9.17
GS-TGluskin Sheff + Associates Inc $17.65
GSY-Tgoeasy Ltd $43.00
HRX-THeroux-Devtek Inc $15.95
ISV-TInformation Services Corp. $18.05
JWEL-TJamieson Wellness Inc. $24.05
KMP.UN-TKillam Apartment Real Estate Investment $15.52
GUD-TKnight Therapeutics Inc $8.15
MAG-TMAG Silver Corp $15.22
MDI-TMajor Drilling Group International Inc $6.94
LEAF-TMedReleaf Corp. $25.56
MEG-TMEG Energy Corp $9.69
MRU-TMetro Inc $43.38
PDL-TNorth American Palladium Ltd $11.80
NWH.UN-TNorthWest Healthcare Properties REIT $11.56
OGI-TOrganigram Holdings Inc. $5.02
PAAS-TPan American Silver Corp $23.28
PEO-TPeople Corporation $8.09
PSH-TPetroshale Inc. $2.36
RFP-TResolute Forest Products Inc. $13.70
SVM-TSilvercorp Metals Inc $3.80
TVE-TTamarack Valley Energy Ltd. $4.21
TIH-TToromont Industries Ltd $58.57
RNW-TTransAlta Renewables Inc $12.36
TFII-TTransForce Inc $38.63
TGL-TTransGlobe Energy Corp $3.16
TCN-TTricon Capital Group Inc $10.68
WCN-TWaste Connections Inc. $97.96
WDO-TWesdome Gold Mines Ltd. $2.07
Y-TYellow Pages Ltd $8.52
Negative Breakouts
CGY-TCalian Group Ltd. $29.40
DHX.B-TDHX Media Ltd $3.30
EXF-TEXFO Inc $4.51
IBG-TIBI Group Inc. $6.89
LLG-TMason Graphite Inc. $1.66
NMX-TNemaska Lithium Inc. $1.00
RME-TRocky Mountain Dealerships Inc $11.10
RAY.A-TStingray Digital Group Inc. $9.01
TV-TTrevali Mining Corp $1.10
ZCL-TZCL Composites Inc. $9.86

Source: Bloomberg

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