Earnings season can be an extremely anxious time for investors since it is one of the few times over the course of the year that an investment idea can be validated against the actual results of a company.
Unfortunately, a number of companies have found themselves well short of the mark this time around and will need to work extremely hard to regain the trust of investors.
Personally, I found these four shares to be a big disappointment this earnings season:
IPH Ltd (ASX: IPH)
I was expecting big things from the intellectual property firm, and while its headline figures showed first-half net profit after tax (NPAT) increased by 19%, the impact from acquisitions meant underlying earnings per share (EPS) only grew by a meagre 3%. While I am still a believer in the long-term prospects of the company, I think IPH will need to deliver a much better second-half result to justify its current valuation.
Capilano Honey Ltd (ASX: CZZ)
After a couple of years of very strong growth, Capilano's latest result was less than impressive. Revenue and profit growth virtually evaporated and this was compounded by a significant outflow of cash during the half. The only real positive from the result was the 87% increase in sales to China. The shares are now trading at around 12.5x earnings and I think this is a pretty fair valuation for the shares at the moment.
iSentia Group Ltd (ASX: ISD)
iSentia was perhaps the biggest disappointment from this earnings season since the company promised so much, yet delivered so little. The media monitoring and intelligence company could only generate 5% revenue growth and actually suffered a 17% fall in EPS. The poor result also led to another profit downgrade and it now has investors seriously questioning its management's decision making ability following the purchase of King Content. Although the shares have now fallen by more than 61% from their 52-week highs, there does not appear to be a quick rebound in sight.
RCG Corporation Ltd (ASX: RCG)
RCG shares have fallen by more than 20% since the clothing and footwear retailer delivered its first-half results and, while its actual profit result was good, its second-half trading update was quite disappointing. Like-for-like sales in a number of segments have actually declined and this has forced the company to lower its full year guidance by around 4%. This is not a disastrous downgrade by any means and so investors may want to take a closer look at RCG at around these levels.
