On today’s TSX Breakouts report, there are 20 stocks on the positive breakouts list (stocks with positive price momentum), and 53 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a small-cap stock that appears on the positive breakouts list - Gold Standard Ventures Corp. (GSV-T).
This is a company with its flagship project located in a prolific gold region in the United States. The company has a very active, fully-funded 2018 exploration program with drilling planned at nearly 400 holes. Potential near-term catalysts include drilling results and the release of a PEA (Preliminary Economic Assessment). There are two gold producers that have significant ownership positions in the stock, Goldcorp Inc. (G-T) and OceanaGold Corp. (OGC-T). This stock is best suited for consideration by investors with a high risk tolerance given the share price volatility and company’s lack of earnings.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Headquartered in Vancouver, Gold Standard is a gold exploration company with operations in the State of Nevada. As a result, the company does not have geopolitical risks. Also positive, the company’s 100 per cent owned Railroad-Pinion Project is located in the Carlin Trend, a prolific gold belt where major players such as Newmont Mining Corp. (NEM-N) and Barrick Gold Corp. (ABX-T) also have properties. Newmont’s Emigrant mine is close by, approximately 16 kilometers away.
In February, the company completed a $38-million financing issuing over 18.6-million shares at a price per share of $2.05. Proceeds from the financing were earmarked to fund its very active 2018 exploration program at its Railroad-Pinion Project with planned drilling at 381 holes (296 infill holes and 85 exploration holes).
Potential catalysts for the stock include positive drilling and exploration results from the Railroad-Pinion Project, a resource update followed by a PEA, which is expected to be released before the end of the year.
Two gold producers have taking an interest in this exploration company. OceanaGold Corp. has a large ownership position, holding over 15 per cent of the shares outstanding. Earlier this month, senior gold producer Goldcorp Inc. increased its ownership position to 12.73 per cent from 9.86 per cent. Interest by industry peers may lead to a potential takeover offer in the future.
Dividend policy
The company does not pay its shareholders a dividend.
Analysts’ recommendations
The small-cap stock, with a market capitalization of $572-million, is covered by five analysts, and all five analysts have buy recommendations. More specifically, four analysts have buy recommendations and one analyst (from BMO Capital Markets) has a ‘speculative outperform’ recommendation.
The firms providing research coverage on the company are as follows in alphabetical order: BMO Capital Markets, Cormark Securities, Euro Pacific Capital, GMP Securities, and Macquarie.
Valuation
The stock can be valued on a price-to-net asset value basis. The average one-year target price is $3.10, implying the share price may appreciate 38 per cent over the next 12 months. Target prices range from a low of $2.40 (from the analyst at Euro Pacific Capital) to a high of $4.25 (from the analyst at Macquarie). Individual target prices are as follows in numerical order: $2.40, $2.75, $3.00, $3.10, and $4.25.
Insider Transaction Activity
The most recent transaction in the public market occurred a few months ago. On May 1, Bill Threlkeld, who sits on the board of directors, sold 52,000 shares at a price per share of $2.10, reducing his portfolio’s position to 192,200 shares. Weeks prior, Mr. Threlkeld sold 40,000 shares at a price per share of $2.10 on April 13.
On April 26, president and chief executive officer Jonathan Awde exercised his options, receiving 220,000 shares, and sold 222,400 shares with 1,217,700 shares remaining in his account after these transactions.
Chart watch
Year-to-date, the share price has been quite volatile, closing at $2.45 on Jan. 26, then collapsing and closing at $1.53 on June 12, and subsequently rallying back to closing at $2.25 on Monday. Consequently, the share price is relatively unchanged so far this year, up just 2 per cent.
Looking at key resistance and support levels, the next major ceiling of resistance is between $2.50 and $2.65, and after that, there is overhead resistance around $3. Looking at the downside, there is initial technical support around $2, close to its 50-day moving average (at $1.91) and its 200-day moving average (at $2.01).
This small-cap stock has reasonable liquidity. The three-month historical daily average trading volume is approximately 418,000 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