On today’s TSX Breakouts report, there are 17 stocks on the positive breakouts list (stocks with positive price momentum), and 27 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appeared on the negative breakouts list last week as the share price has been under pressure over the past few months. There are 10 analysts that have buy recommendations on the stock, anticipating the share price will deliver strong gains to investors in the year ahead. Management has strong growth expectations with production to rise to between 9,000 and 10,000 barrels of oil equivalent per day (boe/d) in 2018, up from 5,740 boe/d reported in 2017. Looking out to 2019, the Street is anticipating cash flow per share will increase over 60 per cent year-over-year. The average target price suggests the share price has 65 per cent upside potential. The security highlighted today is Yangarra Resources Ltd. (YGR-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Yangarra Resources is a junior oil and gas company with operations focused on the Cardium in central Alberta.
After the market closed on Aug. 8, low-cost producer Yangarra, reported solid second-quarter financial results. The company announced an increase to its 2018 capital budget, raising it to $120-million from $90-million. Management maintained its 2018 production outlook, expecting annual production of between 9,000 boe/d and 10,000 boe/d. The following trading day, the share price rallied 4 per cent on high volume with over 1-million shares traded.
Dividend policy
Management is focused on growth. As a result, the company currently does not pay its shareholders a dividend.
Analysts’ recommendations
There are 11 firms providing research coverage on this small-cap stock with a market capitalization of $414-million, of which 10 analysts have buy recommendations and one analyst (from Peters & Co.) has a “sector perform” recommendation.
The firms providing research coverage are as follows in alphabetical order: Acumen Capital, AltaCorp Capital, Canaccord Genuity, CIBC Capital Markets, Cormark Securities, Industrial Alliance Securities, Laurentian Bank Securities, Paradigm Capital, Peters & Co., Raymond James, and TD Securities.
Valuation
The stock can be valued on an enterprise value-to-debt adjusted cash flow basis. The consensus one-year target price is $8, implying the stock price has 65 per cent upside potential over the next 12 months. Individual target prices are as follows in numerical order: $5.50 (from the analyst at Peters & Co.), $7, $7.50, $8, four at $8.25, and three at $9.
Revised recommendations
Earlier this week, two analysts increased their expectations. Sean Keaney, the analyst from TD Securities, bumped his target price up to $7.50 from $7. Thomas Matthews, the analyst from AltaCorp Capital, inched his target price higher to $8.25 from $8.15.
Last week, CIBC Capital Markets analyst Scott Reid raised his target price to $8.25 from $7.50.
Last month, Michael Charlton, from Industrial Alliance Securities, lifted his target price to $8.25 from $7.75.
In July, Trevor Reynolds, the analyst from Acumen Capital, lifted his target price by 50 cents to $8. Jeremy McCrea from Raymond James increased his target price to $8.25 from $8.
Financial forecasts
The consensus cash flow per share estimates are $1.10 in 2018, up from 63 cents reported in 2017, and anticipated to rise to over 60 per cent to $1.78 in 2019.
Forecasts have been increasing for next year. For instance, three months ago, the consensus cash flow per share estimates were $1.11 for 2018 and $1.58 for 2019.
Insider transaction activity
In recent weeks, several insiders have been buyers in the market.
Over a course of two days, Sept.4 and 5, director Neil MacKenzie purchased a total of 10,000 shares, increasing his portfolio’s position to 792,167 shares.
Between Aug. 10 and Aug. 30, president and chief executive officer Jim Evaskevich acquired a total of 90,000 shares at an average price per share of $4.69, increasing his account’s holdings to 2,487,118 shares.
Between Aug. 20 and Sept. 5, Gurdeep Gill, vice-president – business development, bought a total of 64,400 shares, lifting his account balance to 91,091 shares.
On Aug. 24, Gordon Bowerman, who sits on the board of directors, purchased 10,000 shares at a cost per share of $4.75, taking his account’s holdings up to 3,420,964 shares.
Insider ownership is material at 21 per cent of the fully diluted shares outstanding.
Chart watch
The share price has been volatile so far this year, closing as high as $6.42 in April and then retreating in the months ahead to close at $4.14 on Sept. 12, its lowest level of the calendar year. Year-to-date, the stock price is down just over 2 per cent.
In terms of key resistance and support levels, the share price has initial overhead resistance around $5, near its 200-day moving average (at $5.08). After that, there is major overhead resistance between $6 and $6.50. Looking at the downside, the stock price has strong support around $4.
The small-cap stock has reasonable liquidity. The historical three-month daily average trading volume is approximately 460,000 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.
Jennifer Dowty