Date of Data Capture: 1/6/2016
Name: GREENCROSS LIMITED (GXL)
Classification: Healthcare/Veterinary Services
Current Price: $7.84
Market Capitalisation: $877M
Forecast EPS Growth: 18.9%
Gross Yield: 2.52%
Consensus Price Target: $7.68
# Covering Analysts: 8
Premium at Current Price: 2%
Price Target Trend: Increasing Flat
Signal Time Frame: Long (Monthly) Medium (Weekly)
Trend Bias: Up (Weekly) (Daily)
Short-term: Positive Neutral
Long-term: Positive Neutral
Set up Notes:
• GXL is digging its way out of the last few remnants of a major correction that saw it fall 58% from its 2014 peak around $11 to dip beneath $5 by late 2015.
• By Feb 2016 GXL was breaking through overhead resistance, later retesting support and last week broke through linear resistance.
• While $8 will take some effort to crack the stock is building momentum and offers aggressive targets from here, with good support clustered down to $7.
Growth Focus: GREENCROSS LIMITED (GXL)
Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.
While we are not fans of having ‘pet stocks’ in general, we are
becoming fans of Greencross Ltd (GXL), a provider of veterinary services as well as pet products and accessories. Covering an array of market needs ranging from general veterinary practices to emergency and diagnostic centres, as well as providing pet medicines and product retailing, and grooming and boarding facilities.
Beginning in 2010 we have seen GXL grow within a strong uptrend from $0.69 in Feb 2010 to a peak of $10.78 by Aug 2014. Since then the price entered into a major corrective phase that saw it fall 58% to a low of $4.51 by Dec 2015. This behaviour isn’t strange or abnormal – most successful stocks eventually become victims of their own success and topple over once momentum starts to falter. Price dynamics do not always perfectly reflect company earnings or potential – and accordingly offer profit opportunities to those that see divergences in them.
We believe this is such a time – while we avoided buying the stock on its way up – preferring to wait for a correction – so too did we want to wait for the pullback to complete and for the dip to play itself out. Volatility tends to be extreme during turning points which are often best avoided as the risk cannot be properly weighed against expected reward. With GXL moving up through structural, dynamic and lastly linear resistance over the last few weeks and months we are seeing signs to renew our confidence that the best may yet be ahead.
The same signal that captured the major uptrend and the correction that followed (based on quarterly data) has turned positive again and we plan to react to that. We have been waiting for the last few layers of resistance to be peeled off and reveal the high probability scenario we now currently have in front of us. While the small dividend is nice it is really the prospect of capital growth on the back of a very well correlated long-term signal that has us viewing the price resistance targets that lie ahead. $8.00 is the last major hurdle but following that we really have to crane our heads back to see the old highs under $11. These could well be on the cards if we are right that GXL is once more off the leash and ready to run.