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On today’s TSX Breakouts report, there are 18 stocks on the positive breakouts list (stocks with positive price momentum), and 19 securities are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that is on the positive breakouts list. Year-to-date, the share price is up 46 per cent and the Street has bullish expectations. There are 10 buy calls and the average target price suggests there is nearly 37 per cent upside potential. The company has a several near-term catalysts that could further lift the share price in the upcoming months. The security highlighted today is Wesdome Gold Mines Ltd. (WDO-T).

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

The company

Wesdome is a gold producer with three projects, two are located in the province of Ontario and one is in Quebec. The company is producing gold at its Eagle River Complex, an underground mine located in Wawa, Ont. In addition, exploration activity continues at its Kiena Mine Complex located in Val d’Or, Que. Furthermore, there is upside potential from its Moss Lake deposit located near Thunder Bay, Ont. The 2018 exploration budget is $10.8-million, which will be used for drilling at Eagle River and the Kiena mine.

Management’s objective is to become a mid-tier producer with two producing mines, one in Ontario and the other in Quebec. Management is targeting future production of between 150,000 ounces and 200,000 ounces per year while lowering costs. To put this in perspective, for 2018, management is guiding to production of between 62,000 and 68,000 ounces per year, and an all-in sustaining cost per ounce of between US$1,100 and US$1,160.

Positive exploration results could give the stock price as boost just as it did on June 26. That day, the company announced positive drilling results from Kiena that sent the share price rallying over 5 per cent on high volume. Another potential near-term catalyst is a resource update from its Kiena Complex expected by the fourth quarter.

Dividend policy

The company does not pay its shareholders a dividend.

Analysts’ recommendations

This small-cap stock with a market capitalization of $412-million is well covered by the Street. There are 10 buy recommendations and one “underweight” recommendation from the analyst at EVA Dimensions.

The 11 firms providing research coverage on the company are as follows in alphabetical order: BMO Capital Markets, Clarus Securities, Desjardins Securities, Echelon Wealth Partners, Eight Capital, EVA Dimensions, Industrial Alliance Securities, Laurentian Bank Financial, M Partners, Mackie Research Capital, and National Bank Financial.

Revised recommendations

In June, George Topping, the analyst from Industrial Alliance Securities, upgraded the stock to a “strong buy” recommendation from a “buy” recommendation and maintained his target price at $5. Raj Ray from Desjardins Securities lifted his target price to $4 from $3.15. Amandip Singh from M Partners raised his target price to $3.90 from $3. Taking an opposing position, Timothy Stanish from EVA Dimensions cut his recommendation to an “underweight” from a “hold.“

Financial forecasts

The Street is anticipating gold production of approximately 69,000 ounces in 2018, then topping 86,000 ounces in 2019, and climbing to 127,000 ounces in 2020. The consensus cash flow per share estimates are 29 cents in 2018, 35 cents in 2019, and 64 cents in 2020.

Valuation

Analysts commonly value the stock on a price-to-net asset value basis.

The consensus one-year target price is $4.19, implying the share price has nearly 37 per cent upside potential over the next 12 months. Target prices range from a low of $3 (from the analyst at Eight Capital) to a high of $5.10 (from the analyst at Mackie Research Capital). Individual target prices provided by 10 firms are as follows in numerical order: $3, $3.75, $3.90, two at $4, $4.25, $4.40, $4.50, $5 and $5.10.

Insider Transaction Activity

In recent week, insiders have been buying shares in the public market and several recent trades are listed below.

On June 13, Charles Main, who sits on the board of directors, purchased 40,000 shares at a price per share of $2.60, increasing his portfolio’s position to 65,000 shares.

On June 6, president and chief executive officer Duncan Middlemiss acquired 52,500 shares at a cost per share of $2.30, initiating a portfolio position.

On June 1, chief financial officer Ben Au bought 5,000 shares at a price per share of $2.24, which increased his account’s holdings to 10,000 shares.

On May 24, director Bill Washington accumulated 23,700 shares at a cost per share of $2.10 lifting his account balance to 173,700 shares.

On May 22, director Warwick Morley-Jepson purchased 30,000 shares at a price per share of $2.03, raising his account’s holdings to 40,180 shares.

Chart watch

Month-to-date, the share price is up 38 per cent. Consequently, the stock price likely needs to pause and digest these gains before climbing higher. The relative strength index (RSI) is at 76, suggesting the stock is in overbought territory. Generally, an RSI reading at or above 70 reflects an overbought condition.

Year-to-date, the share price is up 46 per cent, strongly outperforming the materials sector of the S&P/TSX composite index and the S&P/TSX composite index, which are up 2.6 per cent and 0.4 per cent, respectively. The stock has rallied despite the year-to-date decline in the price of gold.

Looking at key resistance and support levels, the stock is currently hovering around $3, a key resistance level. Should the share price break materially above $3, the next ceiling of resistance is around $3.50 and after that around $4. In terms of downside support, should the share price break materially below $3, the next technical support level is around $2.50, just above its 50-day moving average (at $2.26). Failing that, there is solid support around $2, close to its 200-day moving average (at $2.04).

This small-cap stock has reasonable liquidity. The three-month historical daily average trading volume is approximately 1-million 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.

Positive BreakoutsJune 29 close
ALA-TAltaGas Ltd $27.15
BIR-TBirchcliff Energy Ltd $4.82
CFX-TCanfor Pulp Products Inc $25.22
CNL-TContinental Gold Inc $3.79
DSG-TDescartes Systems Group Inc $42.83
ENB-TEnbridge Inc $47.00
ENF-TEnbridge Income Fund Holdings Inc $32.24
ENGH-TEnghouse Systems Ltd $76.77
FSV-TFirstService Corp $99.99
ITX-TIntertain Group Ltd $17.17
KL-TKirkland Lake Gold Inc $27.84
MEQ-TMainstreet Equity Corp $43.68
MEG-TMEG Energy Corp $10.96
MX-TMethanex Corp $92.96
TVE-TTamarack Valley Energy Ltd. $4.61
TGL-TTransGlobe Energy Corp $3.64
VET-TVermilion Energy Inc $47.41
WDO-TWesdome Gold Mines Ltd. $3.07
Negative Breakouts
ADW.A-TAndrew Peller Ltd $17.05
BNS-TBank of Nova Scotia $74.44
BB-TBlackBerry Ltd $12.68
BPF.UN-TBoston Pizza Royalties Income Fund $19.72
CEU-TCanadian Energy Services & Technology Co $4.49
CAS-TCascades Inc $11.77
CGO-TCogeco Inc $58.12
KWH.UN-TCrius Energy Trust $6.73
DHX-TDHX Media Ltd $2.73
DPM-TDundee Precious Metals Inc $3.14
FRII-TFreshii Inc. $6.19
GCG-TGuardian Capital Group $23.00
HLF-THigh Liner Foods Inc $10.17
IFC-TIntact Financial Corp $93.25
MRE-TMartinrea International Inc $14.10
PDL-TNorth American Palladium Ltd $9.55
RUS-TRussel Metals Inc $26.87
SII-TSprott Inc $3.04
VLN-TVelan Inc $13.99

Source: Bloomberg

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
WDO-T
Wesdome Gold Mines Ltd
+2.85%10.09

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