On today’s TSX Breakouts report, there are just seven stocks on the positive breakouts list (stocks with positive price momentum), notably gold stocks, and 87 stocks are on the negative breakouts list (stocks with negative price momentum).
The recent collapse of two U.S. banks lifted gold stocks. Discussed today is a gold stock that appears on the positive breakouts list - Osisko Gold Royalties Ltd. (OR-T).
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Year-to-date, Osisko’s share price is up 15 per cent, making it the 11th-best performing stock out of 50 stocks in the S&P/TSX materialsindex. However, from a technical analysis perspective, the stock is approaching a major ceiling of resistance. Over the past nine years, the share price has traded largely between $12 and $18 and is currently at the upper end of this trading band.
A brief outline on Osisko is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
Montreal-based Osisko is a precious metal royalty company that holds a portfolio of over 180 royalties, streams and precious metal offtakes concentrated in North America.
The company is dual-listed, trading on both the Toronto Stock Exchange and the New York Stock Exchange under the ticker OR.
According to Bloomberg, the Caisse de dépột et placement du Québec, an institutional investor with a longer-term investment horizon, owns 5 per cent of the shares outstanding, down from 7 per cent five months ago.
- Gold exposure without direct production and development costs. In 2022, 67 per cent of gold equivalent ounces (GEOs) stemmed from gold, 18 per cent from silver, 14 per cent from diamonds, and the balance, 1 per cent, from other commodities.
- Exposure to regions with low geopolitical risk. In 2022, 73 per cent of GEOs earned stemmed from Canada.
- Partnerships with established gold producers including Newmont, Agnico Eagle Mines, and Yamana Gold.
- Diversified cash flow with over 180 royalties, streams and offtakes.
- Solid growth anticipated. Management targets 2023 GEO’ of between 95,000 and 105,000, up from 89,367 GEOs reported in 2022, jumping to between 130,000 and 140,000 in 2027.
- Reasonable valuation.
- Reliable dividend. Quarterly dividend was maintained throughout the COVID pandemic.
- Perceived safe haven during times of heighten macroeconomic uncertainty.
Returning capital to shareholders
The company pays its shareholders a quarterly dividend of 5.5 cents per share, or 22 cents per share yearly, equating to a current annualized yield of 1.2 per cent.
In 2022, the company repurchased 1.7 million shares for $22.1-million at an average price per share of $13.06.
Quarterly earnings results
After the market closed on Feb. 23, the company reported record fourth-quarter financial results. Revenue from the royalty and streaming business totaled a record $61.9-million and adjusted earnings per share came in at a record 19 cents, ahead of the consensus estimate of 12 cents per share. In terms of production, Osisko earned a record 25,023 in GEOs.
With a market capitalization of $3.5-billion, this stock is well covered by the Street. According to Bloomberg, after the company reported its fourth quarter earnings, 12 analysts issued research reports - 11 with buy-equivalent recommendations and one (BMO’s Rene Cartier) with a “market perform” recommendation.
The firms providing recent research coverage on the company are as follows in alphabetical order: BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Cormark Securities, Eight Capital, Haywood Securities, iA Capital Markets, National Bank Financial, Raymond James, RBC Dominion Securities, Stifel Canada, and TD Securities.
After the company released its fourth quarter financial results in February, five analysts revised their target prices.
- Cormark’s Nicolas Dion to $23 from $21.
- Haywood’s Kerry Smith to $25 (the high on the Street) from $23.
- Raymond James’ Brian MacArthur to $22 from $22.50.
- Stifel’s Ingrid Rico to $21 from $20.
- TD’s Greg Barnes to $22 from $24.
According to Bloomberg, the Street is forecasting double-digit growth for the company with cash flow per share expected to come in at 98 cents in 2022 and $1.10 in 2023. The consensus earnings per share estimates are 51 cents in 2023 and 62 cents in the following year.
Over recent months, estimates have increased. Three months ago, the Street was forecasting cash flow per share of 95 cents in 2023 and $1.08 in 2024. The consensus earnings per share estimates were 47 cents for 2023 and 59 cents for 2024.
Analysts commonly value the stock on a price-to-net asset value (NAV) basis, as well as on a price-to-cash flow (P/CF) basis. According to Refinitiv, the stock is trading at a P/NAV of 1.3 times. According to Bloomberg, the stock is trading at a P/CF multiple of 19.3 times the 2023 consensus estimate, in-line with the five-year historical average.
According to Bloomberg, the average one-year target price is $22.64, implying there is 21 per cent upside in the share price over the next 12 months.
Over the past nine years, the share price has traded largely between $12 and $18 and is currently at the upper end of this trading band.
Year-to-date, Osisko’s share price is up 15 per cent, making it the 11th best performing stock out of 50 stocks in the S&P/TSX materials [sector] index.
In terms of key technical resistance and support levels, the stock has a major ceiling of resistance between $18 and $19. Looking at the downside, there is initial support around $14. Failing that, there is technical support around $12.
ESG Risk Rating
According to Sustainalytics, Osisko Gold Royalties has an ESG (environmental, social and governance) risk rating of 12.9 as of Jan. 20, 2023. A rating of between 10 and 20 reflects “low” risk.
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.
This report should be considered an investment recommendation
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