Is it time to buy Ainsworth Game Technology Limited, Cover-More Group Ltd, and FlexiGroup Limited?

Here's why Ainsworth Game Technology Limited (ASX:AGI), Cover-More Group Ltd (ASX:CVO), and FlexiGroup Limited (ASX:FXL) hit their lowest point all year this week.

| 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

Reporting season always brings a few surprises – pleasant for some, unpleasant for others – as company updates are released and investors re-evaluate their expectations.

The following three companies have hit their lowest point all year in the past week, and here's why:

Ainsworth Game Technology Limited (ASX: AGI) last traded at $2.00, down 26% for the year

Ainsworth's results aren't expected out until next week, but the company has been on the receiving end of a good deal of bearishness in the past few months. The initial decline started with the company's purchase of Nova Technologies, a gaming manufacturer in North America. The deal is expected to be immediately earnings accretive, but investors may have felt that the price of 8.1-8.5 times trailing 12-month Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) was too much.

Investors may also have felt that the purchase was a sign that organic growth has slowed. Taking a more optimistic viewpoint, the acquisition gives Ainsworth a footprint in 11 US states, no mean feat given the regulatory hurdles in that market. I believe Ainsworth's price could go in either direction from here, depending on the contents of the upcoming report.

Cover-More Group Ltd (ASX:CVO) – last traded at $1.76, down 12% for the year

Cover-More shares took a dive earlier this week after the company warned investors to expect a heavy decline in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) when it releases its report to the market on 19 February. Higher claims costs as well as a weaker Australian dollar and one-off events like the ash cloud over Bali played a part, despite higher overall sales.

Lumpy earnings are part and parcel of owning an insurer, but investors should also beware that the industry is highly competitive and it is very difficult for insurers to differentiate their products from other insurers. I wouldn't be surprised to see Cover-More shares decline further after its report is released, depending on the final impact to profits and the outlook for the next half.

FlexiGroup Limited (ASX: FXL) – last traded at $2.12, down 39% for the year

FlexiGroup had a tough day on the market after its interim report yesterday, with shares falling 17% despite posting 6% revenue and 7.5% profit growth over the past six months. Possibly investors were disappointed with the lack of growth in the Australian Leasing segment, FlexiGroup's largest. A further possibility is that the market is pricing in a chance that FlexiGroup would have to impair its receivables and customer loans (i.e., that defaults will rise). Impairments as a percentage of receivables rose to 3.5%, compared to 3% in the prior year.

That aside, yesterday's report was still a solid performance from FlexiGroup, which remains well funded and has a conservative dividend payout ratio that still yields above 7%, fully franked, at today's prices. It's hard to see an already-discounted FlexiGroup heading lower in the absence of any bad news.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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 »