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3 companies trading at 52-week lows – is this the bottom?

Investors in the ASX have seen a see-saw of activity lately, with the index dropping almost to ‘correction’ territory (a 10% decline) before experiencing six trading days of consecutive rises.

While the market moves as it wants, the three companies in today’s article are down in the doldrums as a direct result of their performance, not the vagaries of market sentiment.

Here’s what you need to know:

Ausdrill Limited (ASX: ASL) – last traded at $0.735, down 48.24% for the year

Ausdrill has taken several heavy blows this year with the collapse of Western Desert resources leaving the company with a $16 million revenue hole and $8 million in unpaid debts.

Recent earnings declines across most of Ausdrill’s business lines and the subsequent revision to expected profit for the year tipped shareholders over the edge and sent Ausdrill down from recent prices of $1.30 in August to the current low of 73 cents.

While the company may have been a little oversold, there are significant issues facing the mining services industry in general and investors would be well advised to keep clear while uncertainty around mining demand continues.

XERO FPO NZ (ASX: XRO) – last traded at $14.58, down 39.25% for the year

Xero has seen its share price tumble over concerns about overvaluation and its U.S. expansion plans despite continuing to post incredible growth figures over recent months.

The company has actually lost 66% of its value from heights of $42 back in March, and it’s no surprise, with yearly revenue (not profit!) of $132 million equating to a little over $1 a share.

As Xero continues to post record growth, increasing its number of paying customers globally by 76% last year and ensuring the company is flush with cash, investors may be happy to pay a premium now in return for rewards in the future.

However the company still looks overvalued on conventional metrics and if you factor in the long wait for earnings to catch up to price, I would not be surprised to see it fall a little further.

Pacific Brands Limited (ASX: PBG) – last traded at $0.43, down 42.67% for the year

The company behind brands such as Slazenger, Bonds, Dunlop, King Gee and more has seen its shares smashed after recent tough results saw debt explode and investors denied a dividend in the name of debt control.

While the decision to sell its workwear division to Wesfarmers Ltd (ASX: WES) will help strengthen the balance sheet and is a sound defensive move by management, it’s no surprise that investors have moved out of the company.

It will be interesting to see where Pacific Brands goes next year since the departure of the workwear division will leave a hole in earnings that is unlikely to be replaced by improvements from other brands.

The prospect of lower earnings – lower debt notwithstanding – is generally enough to scare investors away and I wouldn’t be surprised to see Pacific Brands fall a little further even though analyst Morningstar puts the company’s ‘fair value’ at $0.56.

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Motley Fool contributor Sean O'Neill owns shares in Xero. The Motley Fool owns shares in Xero.

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