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CRASH: Isentia Group Ltd plunges 20% on shock downgrade

Shares in Isentia Group Ltd (ASX: ISD) nosedived this morning after the company released a trading update as part of its Annual General Meeting presentation.

Source: Google Finance

Source: Google Finance

Management revealed that the first half Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) would be lower than the previous first half. Second half earnings are expected to be stronger, leading to a ‘high single digit’ EBITDA growth forecast for the year, instead of the double digits that were expected previously.

The update has left its mark on Isentia shares, which are now down some 35% for the year, or nearly 50% from highs of $4.95 that were reached in January. It’s just another example, alongside Carsales.Com Ltd (ASX: CAR), Blackmores Limited (ASX: BKL) and CSL Limited (ASX: CSL) of how quickly share prices can turn if companies can’t maintain the expected high growth rates.

Right now at $2.60, Isentia is trading at around 21 times last year’s profits of $24 million. This is a little above the ASX average, which more accurately prices in the lower growth forecast this morning.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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