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Can the iSentia Group Ltd share price bounce back after last month’s 42% drop?

The iSentia Group Ltd (ASX: ISD) share price has been smashed over the past month, plummeting more than 42%. To provide some context, that’s a loss of around $4,200 for shareholders who owned $10,000 worth of ISD shares one month ago.

The loss is even worse when you zoom out further: The iSentia share price has shed more than 67% of its value since its shares peaked at around $5 late in 2015 and more than 60% since October 2016. One share is currently fetching $1.62.

What happened to iSentia?

iSentia Group isn’t a name that is familiar to many individuals nor investors. But its services are very familiar to some of the biggest companies around.

In a nutshell, iSentia is a business that provides media intelligence services to companies, brands, governments and agencies around the world. It gathers information from thousands of sources (such as newspapers, social media pages and radio broadcasts, to name a few) and reports the information to its customers who want to know what is being said about them, when, and by whom.

The company’s shares have suffered two major setbacks over the past six months. In November, it released a trading update which revealed that first-half operating earnings (that is, earnings before interest, tax, depreciation and amortisation, or EBITDA) would be lower than the prior corresponding period, while full-year revenue and EBITDA growth would be in the ‘high-single-digit’ range. “High-single-digit” growth isn’t what you want from a business trading on a somewhat lofty valuation.

Then again last month, the market was given another glimpse at how poorly its Content Marketing division was performing. In fact, that segment is expected to produce a $3 million operating loss for the full year with EBITDA growth for the group (that is, all segments of iSentia) now expected to be in the low single digit range.

Is it worth your time?

Although investors were once willing to pay a reasonable premium for iSentia’s shares, that willingness has all but evaporated now. In fact, according to a consensus estimate of 14 cents of earnings per share for this financial year, according to Yahoo! Finance, the company’s shares are trading on a forward price-earnings ratio of less than 12x.

On that rationale, it could be worth investors having a closer look at iSentia at this share price. That said, risk-averse investors may want to steer clear: if iSentia does recover from here, it could well be a bumpy ride.

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Motley Fool contributor Ryan Newman 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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