On today’s TSX Breakouts report, there are 31stocks on the positive breakouts list (stocks with positive price momentum), and 34 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a stock that is on the positive breakouts list. The share price is in a multi-year uptrend, closing at a record high on Wednesday. This small-cap growth stock is covered by six analysts with a unanimous buy recommendation. Analysts are forecasting over 24 per cent top line growth for the company over the next fiscal year. The security discussed today is People Corporation (PEO-X).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Winnipeg-based People Corporation provides employment services such as employee group benefit consulting, pension consulting, and human resource consulting and recruitment services.
On Aug. 21, the company completed a $40-million financing, issuing over 5-million shares at a price per share of $7.70. Proceeds from the financing were used to fund the recent acquisition of Silverberg & Associates Inc., which was announced on Aug. 1. Silverberg is Alberta’s largest privately owned employee benefits advisor.
On July 23, the company reported solid third-quarter fiscal 2018 financial results (the company’s fiscal year-end is August 31). Revenue came in at $33.3-million, up from $28-million reported during the same period last year. This impressive top line growth rate of 18.9 per cent was a combination of acquisition and organic growth with acquisition growth representing 11.7 per cent and organic growth representing 7.2 per cent. The company indicated that the organic growth was a reflection of new client additions, and greater product and service offerings to existing clients. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $7.4-million, up from $5.4-million reported last year, and surpassing the consensus estimate of $6.9-million.
The stock trades on the Toronto Venture Exchange.
Dividend policy
Management is focused on growth, both acquisition and organic growth, and as a result, the company currently does not pay its shareholders a dividend.
Analysts’ recommendations
This small-cap industrials stock with a market capitalization of $462-million is covered by six analysts and every single analyst has a buy recommendation. The analyst at Cormark Securities has a ‘top pick’ recommendation.
The six firms providing research coverage are as follows in alphabetical order: Acumen Capital, Clarus Securities, Cormark Securities, Laurentian Bank Securities, Macquarie, and National Bank Financial.
Revised recommendations
In August, three analysts revised their target prices – all higher.
Jaeme Gloyn, the analyst from National Bank Financial, increased his target price to $9.25 from $9. Brian Pow, from Acumen Capital, lifted his target price to $9.50 from $9. Meny Grauman from Cormark Securities bumped his target price to $10 (the high on the Street) from $9.20.
Financial forecasts
The Street is forecasting revenue of $131-million in fiscal 2018 rising over 24 per cent to $163-million in fiscal 2019. The consensus EBITDA estimate is $27.1-million in fiscal 2018, and anticipated to climb to $35.4-million in fiscal 2019. The consensus earnings per share estimates are 11 cents for fiscal 2018 and 22 cents for fiscal 2019.
The stock has experienced positive earnings revisions for the next fiscal year. For instance, three months ago, the consensus EBITDA estimates were $27-million for fiscal 2018 and $33.5-million for fiscal 2019.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 12.1 times the consensus fiscal 2020 estimate, slightly above its three-year historical average of 11.8 times.
The average 12-month target price is $9.56, implying the share price has over 14 per cent upside potential over the next year. Individual target prices are as follows in numerical order: $9 (the low on the Street is from the analyst at Clarus Securities), $9.25, $9.30, $9,50, $9.75 and $10 (the high on the Street is from the analyst at Cormark Securities).
Insider transaction activity
Scott Anderson, who sits on the board of directors, has been a net buyer of shares, both buying and selling shares for accounts in which he has control or direction over. On Sept. 3, Mr. Anderson sold 5,000 shares at a price per share of $8.16. On Aug. 27, he purchased 750 shares at a cost per share of $7.94 and on Aug. 22, he acquired 10,000 shares at a price per share of $7.95.
Chart watch
The share price remains in a multi-year uptrend, making higher highs and higher lows. On Wednesday, the stock price closed at a record high of $8.33. Year-to-date, the stock price has rallied 8 per cent.
Looking at key resistance and support levels, the stock has initial overhead resistance around $9. Looking at the downside, the share price has initial technical support around $8, close to its 50-day moving average (at $8.04). Failing that, there is strong technical support around $7.50, near its 200-day moving average (at $7.60).
Liquidity for this small-cap stock is low, which can increase price volatility. The three-month historical daily average trading volume is approximately 60,000 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.
Jennifer Dowty