Taking a look at some of the companies on the local share market hitting 52-week lows can sometimes point you in the direction of bargain opportunities, or in the direction of companies you might want to avoid at all costs.
Three companies among those hitting new lows today in particular caught my attention.
Let's take a look at what might be behind the big share price falls and whether they might have created some buying opportunities.
The Reject Shop Ltd (ASX: TRS) share price has plunged 45% since last week after it reported that all its operating regions had reported negative comparable store sales growth for the quarter ending March 31 2017.
As a result the company expects to post a net operating loss of $5 million for the six-month period ending June 30 2017. Whichever way you look at it this is a worrying update for a business that is likely to face increasing competitive pressures in the years ahead. I'm not a buyer of Reject Shop shares.
Vocus Communications Limited (ASX: VOC) shares have plunged to $3.60 despite the company releasing no news to the market as investors worry about a reported legal dispute with IBM. Otherwise investors could be worrying over the potential for competitors to construct a sub-marine internet traffic cable between Australia and South East Asia to compete with that being built by Vocus.
Still the stock looks cheap on around 11x estimated forward earnings with a fully franked dividend yield likely to be in the region of at least 3.6% over FY 2017. I expect buying Vocus shares at today's valuations will produce good returns for investors in the years ahead.
The iSentia Group Ltd (ASX: ISD) share price is today touching record lows as investors worry about the worth of its recent acquisition of the King Content business. So far under iSentia's ownership King Content has posted losses which is a disastrous result for a business that iSentia agreed to pay up to $48 million for if certain earn out provisions are met.
iSentia has also attempted to expand into Asia, with investor sentiment on the business dramatically reversing over the last 12 months as concerns over competition and its profit outlook come to the fore. I'm not a buyer of iSentia shares, despite the big price falls.
