In terms of economic news releases, it is another busy day for U.S. reports with February housing starts data, February building permits figures, weekly initial jobless and continuing claims, as well as the January JOLTS job openings report.
There are four companies in the S&P/TSX composite index scheduled to report their fourth-quarter earnings results today before the market opens, Asanko Gold Inc. (AKG-T), B2Gold Corp. (BTO-T), Knight Therapeutics Inc. (GUD-T), and Premium Brands Holdings Corp. (PBH-T).
Briefly recapping Wednesday's stock market returns, all major North American equity indices closed with solid gains.
In the U.S., the Dow Jones Industrial Average rallied 0.54 per cent, the S&P 500 index gained 0.84 per cent, and the Nasdaq composite index increased 0.74 per cent.
Turning to Canada, the S&P/TSX composite index added 141 points, or 0.92 per cent, with 10 of the 11 sectors in the index closing higher. There were 206 securities in the TSX index that advanced, 39 securities declined in value, and four stocks closed the day unchanged.
The TSX index is up 1.53 per cent year to date.
On today's TSX breakouts report, there are 31 stocks on the positive breakouts list (stocks with positive price momentum), and 17 stocks are on the negative breakouts list (stocks with negative price momentum).
The stock featured today appears on the positive breakouts list. The company is Industrial Alliance Insurance and Financial Services Inc. (IAG-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Industrial Alliance is a leading insurance and financial services company in Canada. The company has four main operating segments: individual insurance, individual wealth management, group insurance, and group savings and retirement.
Dividend policy
Management is firmly committed to its dividend policy, announcing five dividend increases over the past three years. Its most recent dividend hike was a 9-per-cent increase announced last month.
The company pays its shareholders a quarterly dividend of 35 cents per share, or $1.40 per share on a yearly basis. This equates to an annualized dividend yield of 2.4 per cent.
Management targets a payout ratio ranging between 25 per cent and 35 per cent. In 2016, the payout ratio was 24 per cent.
Financial forecasts
The Street is forecasting EPS of $4.93 in 2017, rising over 7 per cent to $5.31 in 2018. Management provided guidance for 2017, calling for EPS of between $4.65 and $5.05.
Earnings revisions
Earnings revisions have been positive. For instance, six months ago, the consensus EPS estimates were $4.72 for 2017 and $5.11 for 2018.
Analysts' recommendations
There are ten analysts that cover the company, of which four analysts have 'buy' recommendations, five analysts have 'hold' recommendations, and one analyst (at Credit Suisse) has an 'underperform' recommendation.
The ten firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, Cormark Securities, Credit Suisse, Desjardins Securities, EVA Dimensions, National Bank Financial, RBC Capital Markets, Scotia Capital, and TD Securities.
Revised recommendations
In February, many analysts lifted their recommendations. Neil Fonseca, the analyst at EVA Dimensions, increased his recommendation to an 'overweight' from a 'hold.' Tom Mackinnon, the analyst from BMO Capital Markets, raised his target price to $65 from $64. Darko Mihelic, lifted his target price to $58 from $54. Doug Young, the analyst from Desjardins Securities, raised his target price by $2 to $61. Mario Mendonca, the analyst from TD Securities raised his target price to $63 from $61. Meny Grauman, from Cormark Securities, bumped his target price to $61 from $59. Finally, Sumit Malhotra, raised his target price to $65.
Valuation
The stock is commonly valued on a price-to-book value as well as a price-to-earnings basis. The book value per share was $40.97 at year end, up 11 per cent year over year.
According to Bloomberg, the stock is trading at a price-to-earnings (P/E) multiple of 11 times the 2018 consensus estimate. This is slightly above its five-year historical P/E average multiple of 10.2 times. Over the past five years, the stock has traded at a forward P/E multiple predominately between 8 times and 13 times.
The consensus target price is $61.56, implying 5-per-cent upside potential for the share price over the next 12 months. Price targets range from a low of $57 (at Credit Suisse), implying the shares are fully valued, to a high of $65 (at BMO Capital Markets and Scotia Capital), suggesting over 10-per-cent upside potential. Individual price targets provided by nine firms are as follows in numerical order: $57, $58, two at $61, two at $62, $63 and two at $65.
Chart watch
The stock chart is positive with the share price remaining in an uptrend.
Year to date, the stock price is up 10 per cent, making the stock the third-best performing company of the 27 members in the S&P/TSX composite index financials sector. Only two stocks, Genworth MI Canada Inc. (MIC-T) and Brookfield Asset Management Inc. (BAM/A-T), have outperformed Industrial Alliance so far this year.
The shares are approaching initial overhead resistance just below $60. If the stock price can break and hold above the $60 level, the share price could rally to the mid-$60s.
Should the share price retreat, there is initial downside support around $56, which is close to its 50-day moving average (at $56.25). Failing that, there is support around $53, and then at $50, near its 200-day moving average (at $49.91).
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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 indices 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.