It's confession season!
Driven by the media need to give everything a catchy title, the weeks leading up to 'reporting season' have now been named 'confession season' for the companies that 'confess' to shareholders that they're probably not going to meet their targets this year.
Continuous disclosure obligations can be a tricky beast because companies have some latitude in deciding precisely when poor trading conditions (for example) become market-sensitive.
The three stocks in today's article have all been decimated by the stockmarket in response to recent 'confessions', and I think at least one of them is a turnaround story. Here's why:
Affinity Education Group Ltd (ASX: AFJ) – last traded at $0.56, down 55% for the year
Affinity Education has been a company on my radar for quite some time, featuring in a number of the regular '52-week lows' articles that I write each week. Back in May, shares traded at $1.01 and I wrote that the falling share price was a concern, however 'if Affinity can keep occupancy levels high then today's prices look like an appealing entry point for a risk-tolerant investor.'
Affinity could not keep occupancy high, and the market has punished news that occupancy has been well below last year's 80% for most of this year.
Introducing a 3% increase in fees at times of weak occupancy doesn't seem like a sound strategy, and I also raised an eyebrow at management's intention to pay a maiden dividend despite the fact that a plummeting share price will put a big lid on the company's growth by acquisition plans.
While today's price is certainly appealing, there is a lot of uncertainty regarding Affinity and I will be sitting this one out on the sideline for the time being.
Flight Centre Travel Group Ltd (ASX: FLT) – last traded at $34.05, down 23% for the year
I, like a number of Foolish contributors, took the opportunity to stock up on Flight Centre shares recently when they dropped 25% on the back of a 0.3% decrease in market share. Analysts feel that the news is a sign that Flight Centre is (finally) losing market share to online-based business.
Flight Centre's CEO fuelled the fire by stating he believes that the company may lose additional market share to companies like Expedia and Priceline. However the company operates in a growing industry, and a 0.3% loss of market share doesn't appear to be an indicator of any significant competitive dramas.
With growing domestic and Euro/US revenue in mind, I feel that Flight Centre is a long-term success story, and I have earmarked additional funds to top up my holding should the company fall to my desired price level of $32.
FlexiGroup Limited (ASX: FXL) – last traded at $3.02, down 8% for the year
Last but not least, FlexiGroup Limited is a company I have suggested as a 'Buy' several times before on the basis of its great dividend, growing earnings, strong market share, and modest price.
Shares in the leasing provider fell almost 20% in the past month as Managing Director and CEO Tarek Robbiati announced he was leaving the company later this year, after just two-and-a-half-years in the top job. FlexiGroup also took the opportunity to again confirm to investors it was on track to achieve profit of $90-91m this financial year.
Mr Robbiati is said to be returning overseas to pursue other opportunities, although he will remain as CEO until a replacement can be found. I see no reason for investors to be concerned, though I personally am biased in favour of long-term CEOs and will wait to see who Mr Robbiati's replacement is before considering a purchase.
Nevertheless at around $3 the price is right for FlexiGroup and I feel the company presents a reasonable prospect at today's prices.
