On today’s TSX Breakouts report, there are 28 stocks on the positive breakouts list (stocks with positive price momentum), and 47 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appears on the positive breakouts list. This defensive stock provided investors with price stability during last week’s market volatility. The stock is trading at a reasonable valuation and has an attractive 5.8 per cent dividend yield. Analysts anticipate the stock will provide investors with a total return (including dividends) of 23 per cent over the next year, on top of its nearly 28 per cent year-to-date gain. The security highlighted today is Superior Plus Corporation (SPB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Toronto-based Superior Plus has three core business divisions: Canadian retail propane distribution, U.S. propane distribution and the specialty chemicals segment. The company is a leading propane distributor in Canada and the U.S.
On May 9, the company released its first-quarter financial results that exceeded expectations with contributions from the NGL Propane acquisition as well as small, tuck-in acquisitions. Last summer, the company completed the U.S.$900-million transformative acquisition of NGL Propane, the largest acquisition in the company’s history. The company reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $239.9-million, up from $152.6–million reported in the prior year and above the consensus estimate of $218.5-million. The following trading day, the stock price rallied 7 per cent to close at $12.36 on high volume with over 2.6-million shares traded.
Management increased its guidance for 2019, hiking its adjusted EBITDA outlook to between $490-million and $530-million, up from its previous guidance of between $445-million and $495-million. This increase was largely due to the adoption of IFRS 16 (International Financial Reporting Standard). In addition, management anticipates achieving U.S.$20-million of run-rate synergies from the acquisition of NGL Propane by the end of 2019, a year ahead of expectations. Management remains focused on reducing its debt levels.
The company pays its shareholders a monthly dividend of 6 cents per share, or 72 cents per share on a yearly basis. This equates to an annualized dividend yield currently at 5.8 per cent.
The company has maintained its dividend at this level since 2014.
Since the company reported its first-quarter financial results, 11 analysts have issued research reports, of with 10 analysts have buy recommendations and one analyst (Joel Jackson from BMO Nesbitt Burns) has a “market perform” recommendation.
The firms providing recent research coverage on the company are as follows in alphabetical order: AltaCorp Capital, BMO Nesbitt Burns, CIBC World Markets, Cormark Securities, Desjardins Securities, Industrial Alliance Securities, National Bank Financial, Raymond James, RBC Dominion Securities, Scotia Capital, and TD Securities.
Earlier this month, three analysts revised their expectations – all higher.
Elias Foscolos, the analyst from Industrial Alliance Securities, tweaked his target price, lifting it to $14.75 from $14.50. Benoit Laprade, the analyst at Scotiabank, increased his target price to $14.25 from $13.75. David Newman, the analyst from Desjardins Securities, raised his target price to $14.50 from $14.
The consensus EBITDA estimates are $395-million in 2019, up from $374-million reported in 2018, and forecast to rise by 4 per cent to $515-million in 2020.
The company has had positive earnings revisions. For instance, three months ago, the consensus EBITDA estimates were $481-million for 2019 and $503-million for 2020.
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 7.5 times the 2020 consensus estimate. Looking back over the past five years, the stock is trading below its peak multiple of approximately 10 times and slightly below its average EV/EBITDA multiple of 7.8 times.
The average one-year target price is $14.50, implying the share price may appreciate 17 per cent over the next 12 months. When combined with the 5.8 per cent yield, this translates to a potential total return exceeding 23 per cent over the next year. Individual target prices are quite concentrated and are as follows in numerical order: two at $14, $14.25, five at $14.50, $14.75, $15, and $16 (the high on the Street if from Damir Gunja, the analyst at TD Securities).
Insider transaction activity
Year-to-date, there have been two transactions in the public market reported by insiders – both purchases.
Most recently, on March 6, the company’s chief financial officer Beth Summers, bought 3,500 shares at a price per share of $11.25, increasing her portfolio’s holdings to 20,150 shares. The cost of this investment exceeded $39,000.
On February 20, Andy Peyton, president of Superior Plus Propane, acquired 12,000 shares at an average cost per share of approximately U.S.$8.58, initiating a portfolio position. The cost of this purchase totaled over U.S.$103,000.
During last week’s market turbulence, the share price held its ground. Year-to-date, the share price is up nearly 28 per cent, steadily recovering from its sell-off during the fourth-quarter 2018 market meltdown.
Last week, in a bullish move, the share price broke above its 50-day (at $11.54) and 200-day (at $11.59) moving averages as well as above a key resistance level (at $12) on high volume.
Looking at key resistance and support levels, the stock’s next major resistance level is between $13 and $13.50. Looking at the downside, there is technical support between $11 and $11.50.
The stock is fairly liquid. The three-month historical daily average trading volume is over 900,000 shares.
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, financial forecasts, 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.
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