Crash: Are Aconex Ltd shares and iSentia Group Ltd shares a bargain?

The Aconex Ltd (ASX: ACX) share price and iSentia Group Ltd (ASX: ISD) share price have been swamped lately, falling 38% and 56% in just six months.

Aconex share price and iSentia Share price

Source: Google Finance

Source: Google Finance

As can be seen in the chart above, it’s been a gut-wrenching few months for investors in these two technology shares. The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up 8% in that time.

But when there is blood in the street, as Warren Buffett would say, it’s time to go hunting for bargains.

Aconex Ltd

Aconex is a construction software provider. Its platform enables almost everything on large scale construction projects to be managed in one place. That kind of software is often very appealing to long-term investors because once a client is using the product to manage a project they are highly unlikely to stop using it.

But with a sour taste in shareholders’ mouths, I think this overpriced lemon was squeezed far too hard. Admittedly, the company is investing heavily for growth, which could pay dividends (figuratively speaking — it does not offer a dividend). However, in my opinion, Aconex is still overpriced. It’s not making a profit and generates minimal cash flow.

iSentia Group

To my mind, iSentia is the same as Aconex in some respects but different in a few other important ways. iSentia’s bread and butter is media monitoring and intelligence, and marketing. Unlike Aconex, iSentia is making a profit, and it shares change hands for around 12 times said profits. That’s not bad.  

Recently, the market was very disappointed by the performance of iSentia’s King Content business, which it acquired a couple of years back. However, the current iSentia share price may be reasonable so long as the company’s existing assets continue their growth. The company is forecast to a pay a 4.2% dividend over the next year.

Foolish Takeaway

At today’s prices, I am not a buyer of Aconex shares. However, I would consider doing further research on iSentia Group given its profitability, free cash flow, dividend and modest growth potential.


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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia owns shares of ACONEX FPO. 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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