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On today's TSX Breakouts report, there are 21 stocks on the positive breakouts list (stocks with positive price momentum), and 29 securities are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that may resurface on the positive breakouts list should the company deliver another strong quarterly earnings report. Last quarter, the company handily beat the Street's expectations sending the share price up nearly 13 per cent. The stock is currently trading at a reasonable valuation with room for multiple expansion. The stock has 13 buy recommendations and one 'underperform' recommendation. The security highlighted today is Open Text Corp. (OTEX-T).

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

The company

Waterloo, Ont.-based Open Text is a leading provider of Enterprise Information Management (EIM) software. The company's software helps its customers automate processes. The company's revenue composition is attractive as Open Text has strong earnings visibility given its high recurring revenue business model (cloud services and subscription revenue). In terms of the company's geographic revenue breakdown, 59 per cent of its revenue is from the Americas, 32 per cent is from the EMEA (Europe, Middle East and Africa), with the balance, 9 per cent, from the Asia Pacific region.

Acquisitions remains a key component of management's growth strategy. On the recent earnings call, the Chief Executive Officer Mark Barrenechea stated, "Acquisitions continue to be our leading growth driver…Our acquisition activity continues, and there's no scarcity of EIM companies for us to consider. We have ample target assets, leadership bandwidth, and available capital."

After the market closed on Jan. 31, the company reported a solid earnings beat. Adjusted earnings per share came in at 76 US cents, well above the consensus earnings per share estimate of 64 US cents. Management outlook was positive. In fiscal, 2017 operating margin was 32 per cent in fiscal 2017. For fiscal 2018, management is targeting an operating margin of between 32 per cent and 35 per cent. Management believes its adjusted operating margins can rise to between 36 per cent and 40 per cent by the end of 2021. The following day, the share price rallied nearly 13 per cent on very high volume.

The company is listed on the Toronto Stock Exchange as well as the Nasdaq under the same ticker, OTEX.

Dividend policy

The company pays shareholders a quarterly dividend of 13.2 cents per share (U.S.), or roughly 53 cents per share on a yearly basis. This equates to an annualized yield of 1.4 per cent.

Since 2014, management has announced a dividend hike each year around the April/May time frame. If history repeats itself, the company may announce another dividend increase in the weeks ahead.

Analysts' recommendations

This technology stock is well covered by the Street. There are 14 analysts that cover this company, of which 13 analysts have buy recommendations and one analyst (from Macquarie) has an 'underperform' recommendation.

Revised recommendations

Analysts increased their expectations after the company reported better-than-expected second quarter results on Jan. 31. Noted below are several of these positive revisions.

All target prices are expressed in U.S. dollars. Paul Treiber, the analyst from RBC Capital Markets, lifted his target price to $46 from $40. Stephanie Price from CIBC Capital Markets raised her target price by $3 to $45. Paul Steep from Scotia Capital increased his target price by $3 to $45. Thanos Moschopoulos from BMO Capital Markets bumped his target price to $42 from $38. Richard Tse from National Bank Financial increased his target price to $50 from $45. Steven Li increased his target price to $44 from $40.

Financial forecasts

All financial figures are expressed in U.S. dollars. The Street is forecasting earnings per share of $2.62 in fiscal 2018, rising to $2.86 in fiscal 2019.

Earnings estimates have been rising. For instance, three months ago, the consensus earnings per share estimates were $2.48 for fiscal 2018 and $2.71 for fiscal 2019.

Valuation

According to Bloomberg, the stock is trading at a price-to-earnings (P/E) multiple of 12.8 times the 2019 consensus estimate, below the stock's three-year historical average of 13.1 times. Over the past three years, the stock has traded at a forward P/E multiple ranging principally from 11 times to 15 times.

All but one analyst expresses his or her target price in U.S. dollars. Upon conversion, the consensus one-year target price is approximately $54.59 in Canadian dollars, implying the share price has 16 per cent upside potential over the next 12 months.

Insider transaction activity

Key senior management executives have been recent sellers in the market.

On March 8, the company's Chief Information Officer John Jamieson exercised his options and sold the corresponding number of shares (25,322), leaving 5,944 shares in his portfolio.

The current Chief Financial Officer John Doolittle will be retired from his post in April, replaced by Madhu Ranganathan, who will join the company next month. Mr. Doolittle has been exercising his options and divesting shares. So far this month, he has sold 25,000 shares with 19,861 shares remaining in his portfolio. He still holds a significant amount of options.

In February, the Chief Executive Officer Mark Barrenechea exercised his options and rights and sold 460,300 shares in the market, reducing his portfolio's holdings to 728,966 shares.

Chart watch

Year-to-date, there is only one sector in the S&P/TSX Composite Index with a positive price return – the technology sector. Open Text has delivered a respectable price return of over 5 per cent, relative to the broader index which is down over 3 per cent. On a longer-term basis, the stock has delivered solid gains to its shareholders.

Currently, the share price is technically overbought. The relative strength index (RSI) is at 71. Generally, a RSI reading at or above 70 reflects an overbought condition.

The stock is approaching a major ceiling of resistance. In terms of key resistance and support levels, the stock price has major resistance just below $48. Earlier this year, on Feb. 1, the share price peaked out at $47.36 and in 2017, the share price peaked out at $47.66 on March 8 before rolling over. If the share price can break above $48, the next ceiling of resistance is around $50, and after that, around $55. Looking at the downside, there is initial support around $44, near its 50-day moving average (at $43.82). Failing that, there is support at $42, close to its 200-day moving average (at $42.23).

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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 indices 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.

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Thursday's TSX Breakouts

Price
Positive BreakoutsMar. 14
AC-TAir Canada $28.03
AGB-TAtlantic Gold Corp. $1.87
CF-TCanaccord Genuity Group Inc $7.33
CFX-TCanfor Pulp Products Inc $16.50
CJT-TCargojet Inc $67.75
CLS-TCelestica Inc $14.62
CG-TCenterra Gold Inc $7.19
CSU-TConstellation Software Inc $897.90
DSG-TDescartes Systems Group Inc $37.51
DRG-UN-TDream Global REIT $13.35
ENGH-TEnghouse Systems Ltd $67.17
FM-TFirst Quantum Minerals Ltd $21.67
GWR-TGlobal Water Resources Inc. $12.00
LGT.B-TLogistec Corp $48.00
MNW-TMitel Networks Corp $11.92
NOA-TNorth American Energy Partners Inc. $6.79
NVU-UN-TNorthview Apartment REIT $26.00
NVO-TNovo Resources Corp. $5.10
SSRM-TSSR Mining Inc. $11.86
TA-TTransAlta Corp $7.46
WFC-TWall Financial Corp. $26.45
Negative Breakouts
AOI-TAfrica Oil Corp $1.28
HOT-UN-TAmerican Hotel Income Properties REIT LP $7.82
USA-TAmericas Silver Corp $4.29
ACO.X-TAtco Ltd $41.78
CBL-TCallidus Capital Corp $8.00
CWB-TCanadian Western Bank $35.07
CJR.B-TCorus Entertainment Inc $7.00
KWH-UN-TCrius Energy Trust $7.59
XTC-TExco Technologies Ltd $9.27
HWO-THigh Arctic Energy Services Inc $3.74
HIVE-THIVE Blockchain Technologies Ltd. $1.32
HBC-THudson's Bay Co $9.24
IMG-TIAMGOLD Corp $6.34
MFI-TMaple Leaf Foods Inc $31.78
NMX-TNemaska Lithium Inc. $1.28
NGD-TNew Gold Inc $3.07
PEY-TPeyto Exploration & Development Corp $10.00
PSK-TPrairieSky Royalty Ltd $26.62
PG-TPremier Gold Mines Ltd $3.07
REAL-TReal Matters $7.40
SJR.B-TShaw Communications Inc $24.34
SCL-TShawCor Ltd $24.15
SJ-TStella-Jones Inc $44.39
STEP-TSTEP Energy Services Ltd. $9.12
TRZ-TTransat AT Inc $9.91
UNS-TUni-Select Inc $21.55
UR-TUrtheCast Corp $0.42
VET-TVermilion Energy Inc $39.60
VFF-TVillage Farms International $6.54

Source: Bloomberg