Wednesday’s TSX breakouts: This oversold stock with 15 ‘buy’ calls has a 3.4% yield and 44% upside forecast

Major North American equity markets delivered rather uneventful returns on Tuesday as investors await news from the U.S. Federal Reserve that may provide clarity on future interest rate hikes.

The Federal Open Market Committee 's two-day meeting, which began on Tuesday, wraps up today with a statement released at 2 p.m. (ET).

On Tuesday, in the U.S., the Dow Jones Industrial Average slipped 0.1 per cent, the S&P 500 Index was relatively flat, up 0.03 per cent, and the Nasdaq composite reported a gain of 0.2 per cent. In Canada, the S&P/TSX composite index regained roughly half of its losses from Monday, advancing 52 points, or 0.36 per cent to close at 14,550. Gold stocks helped lift the TSX Index higher.

Month to date, the TSX Index is up 3.45 per cent, and year to date, the Index is up a respectable 11.84 per cent.

On today's Breakouts Report, there are 34 securities on the positive breakouts list (stocks with positive price momentum), and nine stocks, all small caps, on the negative breakouts list (stocks with negative price momentum.

Discussed today is a stock from the negative breakouts list that is currently in oversold territory. The stock offers investors an attractive yield and the Street has strong expectations for the stock over the next year with an average one-year expected price return of 44 per cent with 15 'buy' recommendations. The security I am referring to is TORC Oil & Gas Ltd. (TOG-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Oil-weighted TORC Oil & Gas is focused on light oil assets in southeast Saskatchewan, developing its Cardium play in central Alberta as well as the Torquay/Three Forks light oil resource play in southeast Saskatchewan.

On July 25, management announced acquisitions of light oil assets in southeast Saskatchewan at a cost of roughly $89.5-million, in combination with a bought deal financing, expecting to raise over $75-million by issuing over 10-million shares at a price of $7.05 per share. The Canada Pension Plan Investment Board (CPPIB), with its large interest in the company, participated in the financing, maintaining its ownership of TORC at approximately 25 per cent.

Management revised its 2016 production guidance higher, now expecting production to average 18,500 barrel of oil equivalent per day (boe/d) and to exit the year with production at 19,400 boe/d.

Dividend policy

The company pay shareholders a monthly dividend of 2 cents per share, or 24 cents yearly per share. This equates to an annualized dividend yield of 3.4 per cent.

In February, management announced a dividend cut, slashing it from 4.5 cents per share to its present 2 cents per share. Management took this capital preservation approach in light of the steep decline in oil prices. Recall, on February 11, the price of oil closed at U.S. $26.21 per barrel.

Valuation

Many analysts value the stock by applying a multiple to its net asset value while factoring in upside potential from its development drilling inventory.

The average one-year price target is $10.07, implying a potential price return of 44 per cent over the next 12 months. Target prices range from a low of $8.50 to a high of $11.25. Individual target prices are as follows: $8.50, two at $9.25, two at $9.50, $9.75, four at $10, $10.50, $10.75, two at $11, and $11.25.

Analysts' recommendations

According to Bloomberg, there are currently 15 buy recommendations from research reports issued in 2016. There are no hold nor sell recommendations.

The Street is forecasting cash flow per share of 70 cents in 2016, rising over 50 per cent to $1.06 in 2017.

Chart Watch

Year to date, the stock price is up 36 per cent, while the price of oil has climbed 16 per cent.

On Tuesday, the price of oil is declined to its lowest level since April, the falling oil price, along with the financing, put pressure on shares of TORC.

There is initial downside support just under $7, near its 200-day moving average (at $6.88). There is significant support around $5. On February 11, when the price of oil closed at $26.21 a barrel, shares of TORC closed at $4.95.

The relative strength index is at 30, suggesting the share are in oversold territory. Generally, a reading at or below 30 indicates an oversold condition.

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.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.