1,000 Canadian stocks: What’s Hot, What’s Not

Every month Investor’s Digest of Canada surveys securities analysts’ opinions and recommendations for over 1,000 Canadian stocks. Here are two of the March survey’s top 10 best stocks to buy.

Oil and gas stock Tamarack Valley Energy (TSX—TVE) saw its production increase year-over-year in 2018. The company said that it achieved a 20 per cent boost in production, an eight per cent increase in oil and natural gas liquids weighting percentage.

1,000 Canadian stocks

Here are two stocks from the ‘Top 10 Time-to-Buy’ list based on Investor’s Digest survey of over 1,000 Canadian companies.

As well, Tamarack maintained stable production volumes of 24,780 barrels of oil equivalent (BOE) per day in the fourth quarter of 2018, relative to 24,765 BOE per day in the previous quarter. All the while, investing only $25.8 million in capital expenditures, which is a $52.3 million reduction from the previous quarter. In reviewing its performance last year, the company said that it met or beat production expectations for each quarter during the year, while staying focused on reducing costs.

TVE has best-in-class balance sheet

In a research note on Feb. 27, Calgary-based Laurentian Bank Securities analysts Todd Kepler and Jonathan Tempro say that Tamarack’s fourth-quarter results showcase the company’s best-in-class balance sheet.

They add that the company’s cash flow per share for the fourth quarter was a little bit south of their expectations due to lower crude pricing. “TVE had pre-released fourth-quarter production of 24,780 BOE per day (66 per cent liquids) in January,” say Messrs. Kepler and Tempro. “Diluted cash flow per share (CFPS) for the quarter was $0.17, in line with Street expectations, but slightly behind our $0.19 estimate mainly due to lower realized light oil pricing.”

In addition to commenting on the company’s year-over-year reserves growth as well as its move to reiterate its 2019 budget of $170 million to $180 million, the analysts say that Tamarack’s balance sheet is top notch.

Net debt to cash flow just 1.2x

“TVE’s 2018 year-end net debt to fourth-quarter annualized cash flow was 1.2 times, which TVE forecasts to drop to approximately one time at year-end 2019,” say the analysts. “We estimate TVE’s debt-to-cash flow this year at less than one time, versus the peer group average at over two times.”

They reiterate their ‘buy’ recommendation and their 12-month target share price of $5.25. All six of the analysts who cover Tamarack rate the company a ‘buy’, which puts the company in a five-way tie for the No. 3 spot with Canadian Natural Resource Ltd., NuVista Energy Ltd., Seven Generations Energy Ltd. and Suncor Energy Inc. on our “Time to Buy” list.

5 analysts rate airline stock a ‘buy’

In February, airline stock Exchange Income Corp. (TSX—EIF) announced results for the fourth quarter of 2018.

For the quarter, the Winnipeg-based company, which operates in the aerospace as well as the aviation and manufacturing segments, reported revenue of $316 million, up 20 per cent year-over-year, while earnings before interest, taxes, depreciation and amortization (EBITDA) of $70 million was up 10 per cent year-over-year. Earnings per share (EPS) were $0.79 compared to $0.72 in the fourth quarter of 2017.

Strong year-over-year growth

“2018 was yet another example whereby our prudent and proven strategy delivered record results, demonstrating our ability to continue EIF’s long track record of dividend growth,” said Mike Pyle, the CEO of EIF, in a statement along with the quarterly results.

Toronto-based IA Securities analysts Nav Malik and Tasmina Hossain say in a Feb. 22 research note that Exchange Income’s performance for the fourth quarter of 2018 shows strong year-over-year growth.

“We are increasing our target price to $46 from $43,” say the analysts, who reiterate their “strong buy” recommendation. “EIF shares remain attractively valued at six times its enterprise value-to-EBITDA ratio, a discount relative to its peers.”

5-year aerial surveillance contract awarded

In a followup research note dated Mar. 4, 2019, Mr. Malik and Ms. Hossain focus on a contract win for Exchange Income.

“EIF announced that its subsidiary, PAL Aerospace, has been awarded a five-year contract by the government of Canada to continue providing aerial surveillance for Canada’s inland, coastal and offshore waters,” they say. Highlighting the long-term growth implications that the expanded contract has for the company, the analysts stick with their ‘strong buy’ recommendation and their $46 target share price.

“The new expanded aerial surveillance contract enhances EIF’s relationship with the Canadian government while also contributing to revenue growth,” they add. “Our positive outlook remains unchanged as we believe EIF has a number of long-term growth drivers including the recent deployment of the Force Multiplier aircraft, and the Fixed Wing Search and Rescue program.”

Of the six analysts who cover Exchange Income, five rate it a ‘buy’ and one rates it a ‘hold’. This puts the company in a two-way tie with Fortis Inc. for the No. 9 slot on our top-10 “Time to Buy” list.

This is an edited version of an article that was originally published for subscribers in the March 22, 2019, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.

Investor’s Digest of Canada, MPL Communications Inc.
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