Small caps performed roughly in line with the broader index in July. The S&P/TSX SmallCap Index rallied 1.39 per cent compared to a 1.50 per cent gain for the S&P/TSX composite index.
Performance within the index was mixed.
There were six sectors out of 11 sectors in the index that delivered positive price returns: technology, energy, industrials, financials and real estate and consumer discretionary with gains of 9.5 per cent, 7 per cent, 3 per cent, 1.5 per cent, 1.3 per cent and 1 per cent, respectively. The communication services and utilities sectors were the leading laggards with losses of 9 per cent and 4.4 per cent, respectively.
The top 10 performers during the month were:
- Energy Fuels Inc. (EFR-T), up 60 per cent
- Bitfarms Ltd. (BITF-T), up 55 per cent
- Patriot Battery Metals Inc. (PMET-T), up 55 per cent
- Tilray Brands Inc. (TLRY-T), up 41 per cent
- 5N Plus Inc. (VNP-T), up 38 per cent
- Valeura Energy Inc. (VLE-T), up 30 per cent
- Lithium Argentina AG (LAR-T), up 28 per cent
- NovaGold Resources Inc. (NG-T), up 28 per cent
- Journey Energy Inc. (JOY-T), up 27 per cent
- Perpetua Resources Corp. (PPTA-T), up 27 per cent
Stocks with the largest positive revisions to their target prices in July include:
- Cronos Group Inc. (CRON-T), up 29 per cent
- Canopy Growth Corp. (WEED-T), up 26 per cent
- Avino Silver & Gold Mines Ltd. (ASM-T), up 24 per cent
- Dynacor Group Inc. (DNG-T), up 23 per cent
- AutoCanada Inc. (ACQ-T), up 22 per cent
- Neo Performance Materials Inc. (NEO-T), up 20 per cent
Stocks with the largest negative revisions to their target prices in July include:
- Arizona Metals Corp. (AMC-T), down 47 per cent
- Tilray Brands Inc. (TLRY-T), down 24 per cent
- Prime Mining Corp. (PRYM-T), down 23 per cent
As of July 31, the index was up 12.95 per cent year-to-date. In comparison, the S&P/TSX composite index was up 10.24 per cent.
This earnings season has boosted growth forecasts. According to Bloomberg, earnings in the TSX SmallCap Index are expected to grow 30 per cent over the next 12 months, up over 5 per cent from last month’s forecast.
Returns have been mixed for small caps in August. The S&P/TSX SmallCap Index has posted gains in 10 of the past 20 years. For the past three consecutive years, the month of August has been challenging for small caps with the index falling 1.43 per cent in 2024, declining 1.5 per cent in 2023 and dropping 2.75 per cent in 2022.
Now, here’s a look at analysts’ current target prices, recommendations, forecast returns and yields for all 240 securities in the S&P/TSX SmallCap Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. Data is as of July 31.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
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