Despite the S&P/ASX 200 (INDEXASX: XJO) being a long way from its yearly high point, there are more companies reaching new heights than there are testing new depths.
Those that have seen their share price plummet recently are suffering from poor performance, although there could be some gems to be scooped up by the shrewd buyer:
Dick Smith Holdings Ltd (ASX: DSH) – last traded at $0.78, down 64% for the year
Dick Smith is suffering simultaneously from a profit downgrade, short selling, and investor perceptions that it is not as good as its competition. These perceptions may be justified, given that JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) both posted solid quarterly results recently.
This combination of factors was sure to crush Dick Smith's share price, and the company now trades on an estimated 7 times its forecast earnings for the year. While the company appears very cheap, its latest full year report revealed that the business did not generate any cash flow, and instead relied on borrowings to sustain its spending.
I do not feel that this is a sustainable practice, and accordingly I'm not diving into Dick Smith just yet.
Credit Corp Group Limited (ASX: CCP) – last traded at $8.61, down 11% for the year
Credit Corp shares took a hit this week after the company announced it would withdraw from SACC 'Small Account Credit Contract' lending from 1 March 2016 as a result of a regulatory decision to refer to all such loans as 'payday loan' regardless of duration, affordability, and pricing.
This segment is approximately 5% of Credit Corp's total receivables and could reflect the loss of a lucrative (although small) earnings segment. However, given the uncertainty surrounding the payday lending sector at present, investors may be better off without it.
Earlier this week Collection House Limited (ASX: CLH) announced substantially slower growth, indicating that competitors were buying debt for prices that it felt did not offer attractive returns to shareholders. Given Credit Corp is one of these competitors, I would suggest investors wait and see before diving into current low prices.
Woolworths Limited (ASX: WOW) – last traded at $24.70, down 30% for the year
As warned by management, Woolworths' bottom line is wearing the brunt of heavy investment in reducing the costs of goods on the supermarket's shelves. In the quarterly report released today, Woolies revealed a 1% decline in same-store food and liquor sales, and the potential for a reduction in first half profit of up to 35%.
Sales at Big W declined 7.9%, and petrol sales also declined heavily due to accounting changes in the Woolworths-Caltex service station partnership. Even though shares have fallen almost 10% so far today, I expect that Woolworths will head lower over the next few months as the full impact of its restructuring is felt.
