Devastated: Vocus Group Ltd share price dives 28% on profit downgrade

The Vocus Group Ltd (ASX: VOC) share price is in a mega-bear market, down 28% today and 73% in the past year. A profit downgrade this morning revealed that full year profits will come in some 20% lower than was previously forecast, which sent shares into free-fall:

Vocus Group share price over the past month (source: Google Finance)

Investors weren’t just concerned about lower profits, with the possibility of dividend cuts occurring if management needs extra cash to pay down debt. The company’s debt burden is looking a bit stretched, with net debt rising to 2.6x Group forecast Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Banking covenants limiting this ratio to 3.5x.

Still, with a price to forecast earnings (P/E) ratio of 9 and rumours of a private equity takeover , smart investors should be running the ruler over Vocus Group.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia owns shares of Vocus Communications Limited. 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.

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