On today’s TSX Breakouts report, there are 22 stocks on the positive breakouts list (stocks with positive price momentum), and 11 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that is on the positive breakouts list. In 2018, the share price more than doubled in value and the stock price continues to climb higher, rising 6 per cent year-to-date. This stock has 10 buy calls - a unanimous recommendation - with a 23-per-cent return forecast over the next 12 months.
The security highlighted today is SilverCrest Metals Inc. (SIL-X).
Given the company is currently not generating any earnings with production several years out, this stock may be best suited for consideration by investors with a high risk tolerance.
A brief outline is provided below that may serve as a springboard for further fundamental research.
Headquartered in Vancouver, SilverCrest Metals is a gold and silver exploration company with all of its properties located in Mexico. SilverCrest Metals is a relatively newly formed company. It was formed in late-2015, spun off from SilverCrest Mines Inc., which was acquired by First Majestic Silver Corp. at a 35 per cent premium to its previous day’s closing price.
The company is actively drilling at its Las Chispas property, which is currently its main focus. In an investor presentation published earlier this month, the company identified the high quality of its main asset, “Las Chispas is in the top 10 highest grade deposits (Measured and Indicated plus Inferred Resources) in the world for deposits with over 50 per cent silver in-situ value.” It was also noted that, “Las Chispas benchmarks in the top five highest grade primary silver projects in the Americas owned by a publicly listed explorer/developer.”
The company has several potential near-term catalysts that may propel the share price higher. In the first half of 2019, the company is expected to release an updated resource estimate, a preliminary economic assessment (PEA) for the Las Chispas project, along with potentially positive drilling results.
The company has a solid balance sheet providing it with the financial flexibility to fund its continued exploration activity. As of Jan. 17, the company had $43-million of cash on its balance sheet. In December, the company completed a $30.66-million private placement.
Insider ownership, which includes management, board members and employees, totals approximately 16 per cent of the shares outstanding.
The company does not pay its shareholders a dividend.
This small-cap stock with a market capitalization of $364-million is well-covered by the Street. There are 10 analysts who provide research coverage on the company and all 10 analysts have buy recommendations. More specifically, two analysts have “speculative buy” recommendations while the other eight analysts have “buy” or “outperform” recommendations.
Analyst coverage has ramped up in recent months with four analysts initiating coverage during the second half of 2018.
The firms providing analyst coverage on the company are as follows in alphabetical order: Beacon Securities, Canaccord Genuity, Cormark Securities, Desjardins Securities, Eight Capital, Macquarie, National Bank Financial, PI Financial, RBC Capital Markets, and Roth Capital Partners.
Earlier this month, four analysts revised their expectations for the stock – all higher.
Raj Ray, the analyst from Desjardins Securities, increased his target price to $5.25 from $3.75. David Medilek from Macquarie lifted his target price to $5.25 from $4.80. Tyron Breytenback from Cormark Securities bumped his target price up to $5.50 from $5.20. Michael Curran from Beacon Securities raised his target price to $7.50 (the high on the Street) from $6.
Production is still several years out. The Street is expecting the company to report revenue of $171-million in 2021 and the consensus earnings per share estimate is 76 cents for that year.
Analysts commonly value the stock on a price-to-net asset value basis.
The average one-year target price is $5.28, implying the share price has 23 per cent upside potential over the next 12 months. Individual target prices are as follows in numerical order: $4.45 (the low on the Street is from Craig Stanley, the analyst at Eight Capital), two at $4.50, $5, three at $5.25, $5.50, $5.65, and $7.50 (the high on the Street is from Michael Curran, the analyst at Beacon Securities)
Insider transaction activity
Last month, between Dec. 5 and Dec. 21, John Wright, who sits on the board of directors, invested over $118,000 in shares of the company. He purchased a total of 37,000 shares at an average price per share of approximately $3.20, increasing his portfolio’s position to 227,500 shares.
In a relatively small transaction, on Dec. 20, the company’s president Chris Ritchie acquired 10,000 at a price per share of $3.156, raising his account’s holdings to 711,800 shares.
The stock chart is strong with the share price remaining in an uptrend, making higher highs and higher lows. In 2018, the share price more than doubled in value, rallying 105 per cent. Year-to-date, the share price is off to a solid start, rising over 6 per cent.
Looking at key resistance and support levels, the stock’s next major overhead resistance level is around $5. Looking at the downside, there is initial downside support around $4, Failing that, there is strong support around $3.50, near its 50-day moving average (at $3.51) and after that support around $3, close to its 200-day moving average (at $3.08).
This small-cap stock can be thinly traded. The three-month historical daily average trading volume is approximately 163,000 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.