On today’s TSX Breakouts report, there are 16 stocks on the positive breakouts list (stocks with positive price momentum), and 77 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appears on the positive breakouts list. On Wednesday, the company reported better-than-expected quarterly financial results and management raised their guidance. As a result, 10 analysts increased their target prices and the share price soared 10 per cent on high volume. Year-to-date, this is the number one performing stock in the S&P/TSX composite index given the company’s strong growth profile. The security I am referring to is Canada Goose Holdings Inc. (GOOS-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Toronto-based Canada Goose is a designer, manufacturer and distributor of premium-priced clothing, selling its products worldwide. The company’s primary focus in outerwear, more specifically, jackets. Consequently, there is seasonality in the company’s revenues with the second and third fiscal quarters the strongest (the company’s fiscal year-end is June 30). The company’s products are sold in 45 countries and its products are made in Canada.
Before the market opened on Nov. 14, the company reported better-than-expected second quarter fiscal 2019 financial results that sent the share price rallying nearly 10 per cent on very high volume. The company reported revenue of $230-million, up 34 per cent year-over-year, surpassing the consensus estimate of $198-million. Gross margin climbed to 55.8 per cent from 50.6 per cent reported during the same period last year. Adjusted earnings per share was 46 cents, up from 29 cents reported last year.
Management raised their guidance for fiscal 2019. On the earnings call, chief financial officer Jonathan Sinclair stated, “Turning to our revised guidance for fiscal ’19, based on the strength of performance across the business, with the particularly significant contribution from the DTC [direct-to-consumer] channel, we are raising our fiscal ’19 financial guidance. We currently expect annual revenue growth of at least 30 per cent, adjusted EBITDA margin expansion of at least 150 basis points and annual growth in adjusted net income per diluted share of at least 40 per cent. This compares to our previous guidance of at least 20 per cent, 50 basis points and 25 per cent, respectively. Our revised guidance assumes annual wholesale growth in the high single digits as well as the opening of five new retail stores”.
The stock is dual-listed, trading on both the Toronto Stock Exchange and the New York Stock Exchange under the same ticker, GOOS.
Dividend policy
Management is focused on growth and currently does not pay its shareholders a dividend.
Analysts’ recommendations
Since the company released its second quarter fiscal 2019 financial results, 12 analysts that have issued research reports on this company, of which nine analysts issued buy recommendations and three analysts issued hold recommendations.
The 12 firms providing recent research coverage are as follows in alphabetical order: Baird, Barclays, Canaccord Genuity, CIBC Capital Markets, Cowan, Credit Suisse, Evercore ISI, Goldman Sachs, Nomura Instinet, RBC Capital Markets, TD Securities, and Wells Fargo Securities.
Revised recommendations
This week, 10 analysts revised their target prices – all higher. Several notable revisions are listed below.
Mark Petrie from CIBC Capital Markets raised his target price to $104 (the high on the Street) from $95. Jim Durran, the analyst from Barclays, increased his target price to $100 from $92. Alexandra Walvis from Goldman Sachs bumped her target price to $91 from$80. Brian Tunick from RBC Capital Markets lifted his target price to $100 from $80. Michael Binetti from Credit Suisse raised his target price to $100 from $88.
Financial forecasts
The company has a strong growth profile. The consensus earnings per share estimates are $1.24 for fiscal 2019, rising 29 per cent to $1.60 for fiscal 2020.
Earnings expectations have been rising. For instance, three months ago, the consensus earnings per share estimates were $1.14 for fiscal 2019 and $1.45 for fiscal 2020.
Valuation
The stock trades at a very high multiple. On a price-to-earnings basis, the stock is trading at a multiple of over 53 times the fiscal 2020 consensus estimate.
Insider transaction activities
On Nov. 9, Kara MacKillop, executive vice-president – people and culture, exercised her options and sold the corresponding number of shares received (15,000) at a price per share of $77.7765, eliminating her portfolio’s holdings.
On Nov. 9, Carrie Baker, executive vice-president – chief of staff, exercised her options and sold the corresponding number of shares received (10,000) at a price per share of $77.767, eliminating her portfolio’s holdings.
On Nov. 1, John Moran, executive vice-president – manufacturing and supply chain, exercised his options and sold the corresponding number of shares received (38,025) at an average price per share of approximately $70.74, eliminating his portfolio position. Proceeds from the sale totaled over $2.6-million.
Chart watch
This is the top performing stock in the S&P/TSX composite index year-to-date with the share price up over 114 per cent.
Looking at key overhead resistance and downside support levels, there is initial overhead resistance around $90, close to its record closing high of $89.73 reached on June 19. There is initial downside support around $80.
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