Here's why CSG Limited shares just tanked 17%

Investors appear unimpressed with CSG Limited's (ASX:CSV) profit results despite strong reported growth.

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

The share price of CSG Limited (ASX: CSV) has tanked around 15% in mid-Monday morning trade after the provider of printing and business technology solutions reported a full year result which has apparently underwhelmed investors.

Here are the key numbers which CSG just announced:

  • Revenue grew 10% year-on-year (yoy) to $247 million
  • Underlying net profit after tax jumped 20% yoy to $26 million
  • Underlying earnings per share of 8 cents per share (cps)
  • Finance lease receivables expanded 24% to $261 million
  • 'Technology as a service' expanded to represent 20% of group equipment sales
  • An unfranked final dividend of 5 cps was declared

Outlook:

CSG has announced that it will launch a direct sales forces of 30 new sales staff across Melbourne, Sydney and Brisbane to target non-CSG customers with its new 'technology as a service' offering. This strategy is in addition to cross-selling products and services to CSG's current customer base.

Management provided an upbeat assessment of the outlook for the current 2017 financial year with revenue forecast to grow by around 22% to over $300 million and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to expand by between 15% and 26% to between $44 million and $48 million.

The dividend is forecast to be maintained at 9 cps.

Foolish takeaway:

CSG operates in a competitive market place where it competes with both global giants as well as listed peers such as FlexiGroup Limited (ASX: FXL) and Thorn Group Ltd (ASX: TGA), whom also provide financial solutions to businesses.

The provision of leasing finance can be a profitable niche, particularly when it is married with a specialist skill such as technology solutions which CSG specialises in.

The market appears to have taken a dim view on the prospects for the equipment leasing sector however with CSG, FlexiGroup and Thorn's share prices down around 12%, 11% and 40% respectively over the past year.

Investors considering investing in this space should first determine why they are right and the market wrong.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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 »