The Motley Fool

Why Austin Engineering Ltd shares are on the nose

What:  Shares in Austin Engineering Ltd. (ASX: ANG) plunged 18% on Wednesday touching a post-GFC low of $1.18 after the mining products manufacturer and service provider reduced its EBITDA earnings guidance for the full year from a range of $37 million to $41 million to between $15 million and $18 million.

So what: The downgrade is obviously enormous and if it wasn’t for the fact that the stock had already declined from a high of $5.03 in the past year, no doubt the stock would have fallen even further.

Certainly the management and shareholders of fellow equipment supplier Bradken Limited (ASX: BKN) must be thanking their lucky stars that the firm didn’t proceed with a proposed acquisition of Austin just a few months ago.

Now what: In conjunction with the earnings downgrade, Austin announced the acquisition of South African business VR Steel. It’s the second recent overseas acquisition Austin has undertaken as the company looks to expand its revenue base and diversify away from the weak Australian market.

While an argument can be made that a number of mining service stocks look cheap at the moment, as Austin’s downgrade proves, it’s very, very difficult to get a handle on just how far this slowdown has to go.

Why risk catching a falling knife when this great stock with a value price tag + growth + big dividends is on offer?

Don't miss what could be the 'story stock' of 2014! Get The Motley Fool's #1 pick now in our newly updated investment report. It's yours FREE. Simply click here for your copy of "The Motley Fool’s Top Stock for 2014."

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.