On May 9, the S&P/TSX Composite Index closed at a record high. Yet, the index is still trading at a reasonable multiple relative to historical levels. According to Bloomberg, the 2024 price-to-earnings multiple is 15.2 times, below the 10-year historical average forward multiple of 16.7 times.
Year-to-date, the TSX is up 6.8 per cent, driven higher by the materials and energy sectors that have rallied 18 per cent and 17 per cent, respectively. Consequently, it is no surprise to see stocks in the materials sector leading the way with the greatest increases to their target prices over recent weeks.
Since March 18, when we last published this report, average target prices for approximately 61 per cent of stocks in the index have moved higher. Amongst the stocks with the largest increases to their average target prices are IAMGOLD Corp. (IMG-T), Lundin Mining Corp. (LUN-T), Capstone Copper Corp. (CS-T), First Majestic Silver Corp. (FR-T), New Gold Inc. (NGD-T), Fortuna Silver Mines Inc. (FVI-T) as well as tech stock, Celestica Inc. (CLS-T). These securities have all seen their average target prices rise by more than 25 per cent in recent weeks.
Stocks with increases to their average target prices of between 20 and 25 per cent include Hudbay Minerals Inc. (HBM-T), Equinox Gold Corp. (EQX-T), Ivanhoe Mines Ltd. (IVN-T), Ero Copper Corp. (ERO-T), Pan American Silver Corp. (PAAS-T), Wesdome Gold Mines Ltd. (WDO-T) and Alamos Gold Inc. (AGI-T).
This report includes a link to a list of analysts’ target prices, recommendations, forecast returns and yields for all securities in the S&P/TSX Composite 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. For the yield provided, Bloomberg calculates this figure by annualizing the most recent announced dividend or distribution value.
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.
Click here to download an Excel version of the report.
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Jennifer Dowty