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On Thursday, major North American stock markets were mixed. U.S. markets were relatively unchanged, but the TSX Index fell.
In the U.S., the Dow Jones Industrial Average increased 0.03 per cent, the S&P 500 index gained 0.06 per cent, and the Nasdaq composite index advanced 0.39 per cent.
In Canada, the S&P/TSX composite index declined 143 points, or 0.91 per cent. There were 88 securities in the TSX Index that advanced, 159 securities declined in value, and three stocks closed the day unchanged.
The TSX Index is up 1.43 per cent year-to-date.
On today's TSX Breakouts report, there are 34 stocks on the positive breakouts list (stocks with positive price momentum), and 69 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a stock from the top performing sector in the TSX Index so far in 2017, a consumer discretionary stock. While this stock has lagged the strong sector return (rallying 4 per cent compared to the sector return of 10.45 per cent year-to-date), the share price may gain traction over the balance of the year. Earlier this week, the stock appeared on the positive price breakouts list and it would not be surprising to see the stock resurface on this list in the near future. The security I am referred to is Cineplex Inc. (CGX-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Toronto-based Cineplex is the Canada's largest movie theatre operator.
On Feb. 15, the company reported weaker-than-expected fourth-quarter financial results that sent the share price falling 1 per cent to $51.30 from $51.86. Cineplex reported revenue of $385-million, below the Street's expectations of $406-million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $66.8-million, falling short of the consensus estimate of $78.8-million.
The company will be reporting its first-quarter financial results before the market opens on May 2. The Street is forecasting revenue of $393-million and EBTIDA of $61-million.
The upcoming release slate appears strong. Second quarter movie releases include Guardians of the Galaxy released on May 5, Pirates of the Caribbean: Dean Men Tell No Tales released on May 26, and Transformers: The Last Knight released on June 23. At year end, Star Wars fans will be lining up to see the eighth Star Wars installment, The Last Jedi, released on December 15.
Dividend policy
Management is committed to providing investors with dependable dividend income along with prudent dividend increases. The company pay shareholders a monthly dividend of 13.5 cents per share, or $1.62 yearly per share. This equates to an annualized dividend yield of 3 per cent.
Analysts' recommendations
There are 10 firms providing recent research coverage on the company, of which seven analysts have buy recommendations, two analysts have hold recommendations, and one analyst (from Accountability Research) has a sell recommendation.
The 10 firms providing research coverage are as follows in alphabetical order: Accountability Research, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Echelon Wealth Partners, National Bank Financial, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Revised recommendations
Analysts' expectations have been rising.
This week, Robert Goff, the analyst from Echelon Wealth Partners, raised his target price to $60 from $54, and Jeffrey Fan, from Scotia Capital, increased his target price to $59 from $57.
Financial forecasts
The Street is forecasting EBITDA of $288-million in 2017, up from $234-million in 2016, with EBITDA anticipated to rise to $321-million in 2018. The consensus earnings per share estimates are $1.80 for 2017, up from $1.25 in 2016, and $2.15 for 2018.
The stock has experienced slightly negative earnings revisions. For instance, four months ago, the consensus EBITDA estimates were $298-million for 2017 and $329-million for 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 11.8 times the consensus 2018 estimate, slightly above its three-year historical average of 11.6 times, but below its peak multiple of approximately 12.8 times during this period.
The average 12-month target price is $56, implying the share price has 5 per cent upside potential over the next year. Analysts have target prices ranging from a low of $44 to a high of $60. Individual target prices are as follows in numerical order: $44, $53, $54, $55, $57, $58, $59, and three at $60.
Insider transaction activity
There has only been one transaction reported in 2017, a relatively small purchase. On March 3, Donna Hayes, who sits on the board of directors, bought 550 shares at a price of $50.22 per share.
Chart watch
Year to date, the stock price has rallied 4 per cent, lagging in the return for the S&PTSX Consumer Discretionary Index, which is up 10.45 per cent.
On a bullish note, on Monday, the stock price broke above $53, a significant resistance level, on high volume with over half a million shares trading hands. This is more than double the three-month daily average daily trading volume of approximately 217,000 shares.
Furthermore, the share price appears to be on the cusp of experiencing a bullish "golden cross" pattern. This occurs when the 50-day moving average (at $51.02) crosses above the 200-day moving average (at $51.04).
Should the uptrend continue, the share price could rally up to between $55 and $56.
Should the share price retreat, there is technical support around $51, close to its 50-day and 200-day moving averages. Failing that, there is strong support around $50.
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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, 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.