3 stocks at 52-week lows: Can they turn it around?

Is the IPO market cooling? Myob Group Ltd (ASX:MYO), Australian Finance Group Ltd (ASX:AFG), and Affinity Education Group Ltd (ASX:AFJ) have hit 52-week lows recently.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Several of the most recent 52-week lows are companies that made their Initial Public Offering (IPO) debut on the ASX earlier this year.

Could the IPO market really be cooling after an explosive 2014? Or – more likely – were these shares simply priced to perfection by owners that didn't leave a lot of upside on the table for buyers?

Myob Group Ltd (ASX: MYO) – last traded at $3.47, down 11.2% to date

MYOB shares are now at a legitimate low point after identification at a 52-week low two weeks ago. Shares have sharpened their slide in recent days, falling even further despite the purchase of Ace Payroll Plus. Costing NZ$14 million, the acquisition is expected to be 'immediately earnings accretive', although it seems investors are nervous over competition with XERO FPO NZ (ASX: XRO), another big name in the New Zealand market.

To my mind there are better shares available for my money, and I personally won't buy shares until I can get a good look at a proper half- or full-year report and/or I see a price I absolutely can't refuse. It's tough to say where MYOB will go from here, but I wouldn't be surprised to see it trend down a little further as IPO sentiment cools.

Australian Finance Group Ltd (ASX: AFG) – last traded at $1.17, down 1.5%

Mortgage broker AFG had a lacklustre launch, dropping a few cents this week to trade below its offer price. This is in stark contrast with a large number of other IPOs in the past 18 months, which on the face of it is surprising.

AFG appears to be a solid business, with more than 2,300 mortgage brokers Australia-wide, strong financials and a ~4.6% dividend. However with the Commonwealth Bank of Australia (ASX: CBA), and National Australia Bank Ltd. (ASX: NAB) cutting discounts for investor loans – the main source of all home loans in Australia at the moment – the market appears worried that this will impact on AFG's business. Competitor Mortgage Choice Limited's (ASX: MOC) shares have cooled a little in recent weeks as well.

I personally will be waiting to see how things evolve over the next few months before making a decision either way on AFG. That said, I don't expect shares to fall much further because the company trades on a reasonable valuation and offers a solid dividend.

Affinity Education Group Ltd (ASX: AFJ) – last traded at $1.01, down 18.7% for the year

Shares in childcare centre owner Affinity haven't performed well at all this year, and even fell below the price of the discounted capital raising back in April. It's possible that the fall in the value of G8 Education Ltd (ASX: GEM) shares has taken a lot of buying interest away from Affinity – after all, G8 shares come with a 5.8%, fully-franked dividend.

There could be more knocks to come as well, with 5.5 million shares set to be released from escrow on the 15 of June. These shares were included as part of the purchase of a group of centres, so if the owners are set on turning them into cash they could be liquidated in short order.

A weak share price reduces the likelihood and effectiveness of capital raisings – hampering the ability to buy new centres – but Affinity has plenty of debt capacity available that it can use to drive acquisitions. The 2015 full year should also see the company deliver its first profit as new centres make their first full year of contributions. It's difficult to guess where the share price might go from here, but if Affinity can keep occupancy levels high then today's prices look like an appealing entry point for a risk-tolerant investor.

Motley Fool contributor Sean O'Neill owns shares in G8 Education and Xero. The Motley Fool Australia owns shares of Xero. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »