There are just two trading sessions left in what has been a positive month and strong start to the new year.
There are no Canadian economic releases today, nor are there any companies in the S&P/TSX composite index scheduled to report earnings results.
In the U.S., December pending home sales are among the key economic releases. Later this week, on Tuesday, the U.S. Federal Reserve kicks off a two-day meeting, and on Friday, January non-farm payroll figures are announced.
This morning, key commodity prices are mixed. The price of natural gas futures are down sharply, falling by approximately 2 per cent. Meanwhile, the prices of oil and gold are relatively unchanged.
Briefly recapping Friday's performances, major North American equity markets closed with minor moves.
In the U.S., the Dow Jones Industrial Average declined 0.04 per cent, the S&P 500 index lost 0.09 per cent, and Nasdaq composite index advanced 0.10 per cent.
Turning to Canada, the S&P/TSX composite index fell 40 points, or 0.25 per cent, led by weakness in energy stocks. There were 97 securities in the TSX Index that advanced, 146 securities declined in value, and six stocks closed the day unchanged.
Month to date, the TSX Index is up 1.89 per cent.
On today's TSX Breakouts report, there are 36 stocks on the positive breakouts list (stocks with positive price momentum), and 10 securities on the negative breakouts list (stocks with negative price momentum). Interestingly, on the positive breakouts list, 25 per cent of the securities are from the technology sector.
The security highlighted today is an industrial mid-cap stock that may appear on the positive breakouts list later this year as the share price steadily climbs higher – WSP Global Inc. (WSP-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
WSP is a leading professional services firm with clients in the transportation and infrastructure, resources, property and buildings, and power and energy sectors. The company has a team of approximately 36,500 engineers, surveyors, architects, planners, advisors, scientists, and environmental specialists with operations worldwide in 40 countries.
Before the market opened on Nov. 8, the company reported an in-line third quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $147.2-million, up from $126.2-million reported during the same period last year, and in-line with the Street's expectations. The adjusted EBITDA margin was solid at 12.4 per cent, and stood at 10.2 per cent during the first nine months of 2016. Backlog stood at $5.3-billion, representing 10 months of revenues. Management is forecasting between 0 per cent and 3 per cent organic growth for 2016. Acquisition growth is a core objective for management, combined with organic growth. The company has been actively purchasing companies with its most recent acquisition announced in October - the purchase of Mouchel Consulting, an infrastructure engineering consulting firm with offices primarily in the U.K. and Ireland, and also in the Middle East. The share price increased 1.4 per cent that trading day.
The company is expected to report its fourth quarter and year end results on March 1.
Dividend policy
The company pays shareholders a quarterly dividend of 37.5 cents per share or $1.50 on a yearly basis. This equates to an annualized dividend yield of 3.2 per cent.
The company has maintained its dividend at this level since 2011.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA (EV/EBITDA) multiple of 10.1 times the 2017 consensus estimate. This valuation is relatively in-line with its three-year historical average of 10.3 times.
Analysts' target prices have a wide range from a low of $45 to a high of $55. Individual target prices supplied by 12 firms are as follows in numerical order: three at $45, $47, three at $48, two at $50, $52, $54, and $55. The consensus one-year target price is $48.92, suggesting the shares are almost fully valued, with just 4 per cent upside potential over the next 12 months.
Analysts' recommendations
According to Bloomberg, 12 analysts have issued research reports on the company since November, seven analysts issued 'buy' recommendations and five analysts reported 'hold' recommendations.
The 12 firms providing recent research coverage are as follows in alphabetical order: Accountability Research, Alta Corp. Capital, BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Desjardins Securities, Laurentian Bank Securities, National Bank Securities, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Recent revisions by analysts
This month, two analysts revised their target prices higher. Last week, Michael Tupholme, the analyst from TD Securities increased his target price to $54 from $50, while maintaining his "buy" recommendation. In addition, Jacob Bout, the analyst from CIBC World Markets, lifted his target price to $47 from $46, leaving his "neutral" recommendation unchanged.
Financial forecasts
The consensus EBITDA estimate is $501-million for 2016, rising over 10 per cent to $555-million for 2017, and forecast to climb 9 per cent to $607-million the following year.
Earnings forecasts have been falling slightly in recent months. For instance, on July 1, the consensus EBITDA estimates were $525-million for 2016 and $578-million for 2017.
Management has guided to realizing adjusted EBITDA of between $485-million and $505-million in 2016.
Chart watch
Year to date, the stock price has rallied 5 per cent.
Since early 2016, the share price has been in an uptrend, making high highs and higher lows.
In terms of key resistance and support levels, the share price is approaching initial overhead resistance around $48.50. Meanwhile, there is initial downside support around $45. Should the share price break below the $43.50 level, the current uptrend would be broken, leaving the share price vulnerable to fall back down to the $40 level.
The relative strength index is at 63, suggesting the shares are in neutral territory, neither overbought nor oversold.
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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.