This morning, trading activity in the S&P/TSX composite index may be light with U.S. stock markets closed for Martin Luther King, Jr. day.
A key Canadian economic news release due out today is December existing home sales, which will be released at 9 a.m. (ET).
Briefly recapping Friday's performance, in the U.S., the Dow Jones Industrial Average was relatively unchanged, declining 0.03 per cent, the S&P 500 Index gained 0.18 per cent, and the Nasdaq composite rocketed higher by 0.48 per cent.
Turning to Canada, the S&P/TSX composite added 79 points, or 0.51 per cent. There were 157 securities in the TSX Index that advanced, 85 securities declined in value, and eight stocks closed the day unchanged.
Month-to-date, the TSX Index is up 1.37 per cent with eight of the 11 sectors in positive territory led by strength in the Materials sector.
On today's TSX Breakouts report, there are 39 stocks on the positive breakouts list (stocks with positive price momentum) and five securities on the negative breakouts list (stocks with negative price momentum).
As always, I like to appeal to a wide range of investors. Discussed today is a micro-cap industrial stock. While it is a small company, it has secured a number of major deals. The security highlighted is Grande West Transportation Group Inc. (BUS-X).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
B.C.-based Grande West is a bus manufacturer specializing in heavy-duty mid-sized transit buses. The company manufactures its Vicinity bus in two sizes, 30 foot and 35 foot, smaller than the standard 40 foot transit bus. As a result, the bus is less expensive and uses less fuel.
The company is expected to experience stellar growth this fiscal year (the company's fiscal year end is August 31). In fiscal 2016, the company sold 16 Vicinity buses. Management indicated in their December earnings news release, that they have, "firm orders for 175 buses for 2017 delivery worth over $61-million."
William Trainer, the chief executive officer, stated, "2016 has been a transformational year for Grande West as the hard work of the past eight years has come together. We have strengthened the team in advance of 2017 deliveries which will begin in January and are very excited about our business outlook. We have streamlined and increased efficiencies in operations, manufacturing, supply chain and quality control which will increase gross margin in all future Vicinity production. The recent Buy America certification has opened up increased tender opportunities in the U.S. and we are currently bidding on opportunities to supply over 150 buses through our distributor ABG. As the order book for 2017 continues to grow, we will begin to populate the order book for 2018 and beyond."
The company has been successful in securing an impressive number of recent deals. Here are a few of their contract wins. In November 2016, the company announced its first U.S. customer contract win with the Hartsfield-Jackson Atlanta International Airport for 13 buses. In October 2016, the City of Saskatoon ordered four buses. In September 2016, B.C. Transit ordered 17 buses, in addition to its initial order for 41 buses announced in May 2016. Also in September 2016, Grande West secured a contract for up to five years with the City of Edmonton for a forecasted order of 45 buses, a deal valued at approximately $18-million. For 2017, the City of Edmonton ordered 16 buses.
An industry peer is New Flyer Industries Inc. (NFI-T).
Dividend policy
Management is focused on growth and currently does not pay its shareholders a dividend.
Analysts' recommendations
According to Bloomberg, this micro-cap industrial stock, with a market capitalization of $99-million, is covered by just one analyst, Amr Ezzat from Echelon Wealth Partners. The analyst has a 'buy' recommendation on the stock with a target price of $2. In December, the analyst changed the recommendation to a 'buy' from a 'speculative buy'.
The analyst is forecasting revenues of $57-million in fiscal 2017, up from $8.2-million in fiscal 2016, and $66-million in fiscal 2018. The analyst is anticipating earnings before interest, taxes, depreciation and amortization (EBITDA) of $6.3-million in fiscal 2017 and $8.8-million the following fiscal year. Finally, the analyst expects earnings per share to reach 9 cents in fiscal 2017 and 12 cents in fiscal 2018.
Chart watch
Trading history is limited with the stock just listed in 2013. The initial public offering price was 50 cents.
Year to date, the share price is up 14 per cent as its positive price momentum continues. In 2016, the share price soared 171 per cent to $1.57 from 58 cents.
On Friday, the share price closed at a new record high, climbing 6.6 per cent on high volume. Over 830,000 shares traded, above the two-month historical daily average trading volume of approximately 473,000 shares.
In terms of key resistance and support levels, the share price faces initial overhead resistance around $2. There is initial downside support around $1.50, which is close to its 50-day moving average (at $1.48).
The relative strength index is at 68, suggesting the stock price is approaching overbought territory. Generally, a reading at or above 70 indicates an overbought condition.
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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.