On Tuesday, major North American stock markets were mixed.
In the U.S., the Dow Jones Industrial Average lost 0.17 per cent, the S&P 500 index declined 0.10 per cent, and the Nasdaq composite index advanced 0.29 per cent.
In Canada, the S&P/TSX composite index fell 83 points, or 0.53 per cent. There were 85 securities in the TSX Index that advanced, 160 securities declined in value, and five stocks closed the day unchanged.
Year to date, the TSX Index is up 1.84 per cent year. In the U.S., the Dow Jones Industrial Average is up 6.14 per cent year to date, the S&P500 index is up 7.06 per cent, and the Nasdaq composite has rallied 13.70 per cent.
On today's TSX Breakouts report, there are 40 stocks on the positive breakouts list (stocks with positive price momentum), and 24 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a security from the positive breakouts list. The stock has been a strong performer for investors, rising over 30 per cent year-to-date, soaring 44 per cent in 2016, more than doubling in value in 2015, and rallying 27 per cent in 2014. In addition, the company offers investors a quarterly dividend, which has been growing, and is currently yielding 1.8 per cent. The security I am referring to is New Flyer Industries Inc. (NFI-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Winnipeg-based New Flyer is North America's largest transit bus manufacturer, and motor coach maker and parts supplier. In 2016, over 90 per cent of the company's revenues stemmed from the U.S., with the balance from Canada.
The company will be reporting its first-quarter financial results today and holding a conference call on May 12 at 9 a.m. (ET). The Street is anticipating revenue of $566-million, earnings before interest, taxes, depreciation and amortization (EBITDA) of $72-million, and earnings per share of 52 cents. Financial figures are all expressed in U.S. dollars, unless otherwise noted.
Dividend policy
The company pays its shareholders a quarterly dividend of 23.75 cents (Cdn) per share, or 95 cents (Cdn) per share yearly. This equates to an annualized dividend yield of 1.8 per cent.
The free cash flow payout ratio was 25 per cent in 2016, down from 31 per cent in 2015, suggesting there is room for the dividend to increase.
Analysts' recommendations
The mid-cap stock, with a market capitalization of $3.3-billion, is covered by seven analysts on the Street, and all analysts have buy recommendations on the stock.
The seven firms providing research coverage on the company are as follows in alphabetical order: Alta Corp. Capital, CIBC World Markets, EVA Dimensions, GMP, National Bank Financial, Scotia Capital and TD Securities.
Revised recommendations
In April, several analysts revised their target prices – all higher. Trevor Johnson, the analyst at National Bank Financial, raised his target price to $60 (Cdn) from $55. Mark Neville from Scotia Capital bumped his target price to $57 from $54. Daryl Young from TD Securities increased his target price to $60 from $53. Kevin Chiang, the analyst from CIBC World Markets, lifted his target price to $57 from $52.
Financial forecasts (all expressed in U.S. dollars)
The Street is forecasting revenue of $2.3-billion in 2017 rising to $2.4-billion in 2018. The consensus EBITDA estimates are $305-million in 2017 and anticipated to rise to $322-million the following year. The Street is forecasting earnings per share of $2.29 in 2017 rising to $2.45 in 2018.
Earnings revisions have been relatively minor for 2017 and positive for 2018. For instance, four months ago, the consensus EBITDA estimates were $307-million for 2017 and $309-million for 2018. The consensus earnings per share estimates were $2.33 in 2017 and $2.45 cents in 2018.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 9.3 times the 2018 consensus estimate, which is above with its three-year historical average of 7.7 times, and at the top of its historical range during this period.
The average 12-month target price is $57.33 (Cdn), implying the share price has 7 per cent upside potential over the next year. Individual target prices provided by six firms are as follows in numerical order: $52, two at $57, $58, and two at $60.
Insider transaction activity
To date in 2017, there have been no purchases or sales in the public market reported by insiders.
Chart watch
Year to date, the stock price has rallied over 30 per cent making New Flyer the top performing stock in the S&P/TSX composite industrial sector index (out of 26 members).
Should the company report better-than-expected first quarter financial results with a strong backlog , the positive price momentum may remain intact with the next major overhead resistance level around $55.
Floors of support should the share price retreat are $50, and then around $48, which is close to its 50-day moving average (at $47.98). Failing that, there is additional technical support between $43 and $45, which is near its 200-day moving average (at $42.94).
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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.