The $1.21 billion small-cap Canadian construction company AECON Group Inc. (ARE.TO) has recently been added to the SIA Hypothetical Equity Income model portfolios. At first glance, it might appear that the stock is running out of steam at the upper reaches of its 10-year trading range. However, SIA's relative strength analysis suggests that a new growth phase has been initiated, with buyers now in control of the stock as it prints fresh highs. Most importantly, our main gauge, relative strength, seems to be entering a new phase of outperformance after many years of underperformance. In the SIA relative strength position chart within the SIA Combined Canadian Dividend Report, we have added two ovals: the first, in red, illustrates the underperformance zone spanning many years, while the latest green oval outlines the new outperformance that is materializing. SIA Charts’ relative strength rankings help investors identify opportunities in stocks that are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for strong company or sector growth. The next table, clipped from the SIA Combined Dividend Report, shows how AECON now ranks above many prominent names that have all experienced massive moves this past year. ARE.TO has experienced a remarkable 68.84% gain in share price, though this still pales in comparison to its dismal 5.52% 5-year performance reading. Shares of AECON Group have an SIA SMAX score of 10 out of 10 (a near-term indicator comparing an asset against various asset classes), showing strong short-term performance across all other asset classes, in addition to the other constituents within the SIA Combined Dividend Report.
Reviewing basic charts of AECON might mask the changes currently underway with the shares, which the attached point-and-figure (P&F) chart illustrates very well. It displays both the long-term breakout and the latest relative strength move into the SIA Favored Green Zone of the matrix report (circled). Based on vertical and horizontal counts, technical price objectives can be established at $23.53, with upper-level resistance marked at $29.26. Support is also tight at $18.93, which represents the 3-box reversal level as well as the supportive level marking the all-time high of 2021, which was recently penetrated. Should a failure occur, support would then find additional backing at $17.14, a zone of support dating back to 2019, which further enhances the risk-reward parameters for ARE.TO. AECON shares are ranked 9 of 241 in the SIA S&P/TSX SmallCap Index Report, 4 of 131 in the SIA Combined Canadian Dividend Reports, and 3 of 93 in the SIA S&P/TSX Canadian Dividend Aristocrats Index Report.
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