In today's TSX Breakouts report, there are 28 stocks on the positive breakouts list (stocks with positive price momentum), and 23 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appeared on the positive breakouts list last week. This is a stock best suited for investors with a high risk tolerance within a well diversified portfolio. The stock has a potential near-term catalyst that could lift the stock price higher. However, a negative announcement could sent the share price tumbling.
The security highlighted today is Theratechnologies Inc. (TH-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Montreal-based Theratechnologies is a pharmaceutical company involved in the development of therapies aimed at treating patients living with HIV, human immunodeficiency virus.
On Nov. 13, the stock price dropped 11 per cent on high volume after the company announced a delay in a decision by the U.S. Food and Drug Administration (FDA) for its drug, ibalizumab. Management has identified ibalizumab as a drug that "potentially prevents HIV from infecting CD4+ immune T cells while preserving normal immunological function."
In the Nov. 13 news release, the company stated, "Theratechnologies Inc. announced that it was notified today by its partner, TaiMed Biologics, Inc. ("TaiMed"), that the U.S. Food and Drug Administration (FDA) will extend its review of the Biologics License Application ("BLA") for ibalizumab. In a notice received today by TaiMed from the FDA, the Prescription Drug User Fee Act ("PDUFA") target action date has been extended to April 3, 2018. The three-month extension period is the FDA's standard extension period. On Oct. 25, 2017, at the FDA's request, TaiMed submitted additional documentation related to the manufacturing section of the BLA, and the FDA subsequently decided it constituted a major amendment that required an extension to the target action date, to provide time for a full review of the submission. The FDA did not request any additional information from TaiMed in this notice."
If ibalizumab is approved on or before April 3, the share price may catapult higher as the company could potentially launch the drug later this year.
If there is another delay in a decision from the FDA, for instance, if additional information is requested, the share price could once again come under pressure. If the drug does not receive approval from the FDA, the share price could tumble sharply.
Dividend policy
Management is current focused on growing the company. Consequently, the company does not pay its shareholder a dividend.
Analysts' recommendations
This small-cap stock with a market capitalization of $594-million is actively covered by six analysts, and all six analysts have buy recommendations on the stock.
The firms providing research coverage on the company are as follows in alphabetical order: Canaccord Genuity, CIBC World Markets, Echelon Wealth Partners, Mackie Research Capital, National Bank Financial, and Scotia Capital.
Revised recommendations
Looking back over the past two months, analysts have left their recommendations and target prices unchanged.
Financial Forecasts
The Street is forecasting revenue of $97-million in 2018, jumping to $193-million in 2019 and reaching $370-million in 2020. EBITDA (earnings before interest, taxes, depreciation and amortization) is forecast to come in at $25-million in 2018, $70-million in 2019, and $127-million in 2020. The consensus earnings per share estimates are 30 cents in 2018, 83 cents in 2019, and $1.51 in 2020.
Analysts have trimmed their earnings forecasts in recent months, which is to be expected given the delay in the FDA decision. For instance, four months ago, the consensus revenue estimates were $112-million for 2018 and $208-million for 2019. The Street was forecasting EBITDA of $29-million in 2018 and $77-million in 2019. The consensus earnings per share estimates were 34 cents for 2018 and 90 cents for 2019.
Valuation
The stock can be valued using a discounted cash flow analysis, forecasting future cash flows and discounting them back to their present values.
The consensus one-year target price is $9.61, suggesting the share price has over 20 per cent upside potential over the next 12 months. Individual target prices range from a low of $8.75 (at National Bank Financial) to a high of $10.30 (at CIBC World Markets). Individual target prices are as follows in numerical order: $8.75, $9.50, $9.80, two at $10, and $10.30.
Insider Transaction Activity
The most recent activity in the public markets reported by insiders occurred in November. All of the transactions were relatively small and all of the trades were purchases.
On Nov. 15, three management executives were buyers in the market.
President and Chief Executive Officer Luc Tanguay bought 4,000 shares, boosting his portfolio's holdings to 234,000 shares.
Senior Vice-President and Chief Medical Officer Christian Marsolais accumulated 7,500 shares at an average price per share of $6.57, increasing his portfolio's position to 34,697 shares.
Chief Financial Officer Philippe Dubuc acquired 2,000 shares, increasing his account's holdings to 21,000 shares.
On Nov. 16, Chief Commercial Officer Lyne Fortin purchased 1,440 shares, increasing her account's holdings to 27,590 shares.
Chart watch
In 2017, the stock price soared 162 per cent and the share price is off to a strong start in 2018, rising 13 per cent.
U.S. FDA approval of ibalizumab would likely send the share price to a new record closing high.
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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 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.