'Earnings season' is always a time of judgement, as investors evaluate companies against their expectations and pile in or abandon ship accordingly. Here are 3 companies that got dumped this August:
Vocus Group Ltd (ASX: VOC) – down 34%
Vocus shares were sold after two non-binding takeover bids at $3.50 per share with both withdrawn by the bidders. Investors worried that the withdrawal could indicate further 'cockroaches' in the Vocus kitchen, plus the company's results themselves weren't all that good – and it cut its dividend. My opinion is that the company is undervalued, but Vocus carries a lot of debt and should be seen as a higher risk investment. It could take a lot of hard work and quite some time to regain investor interest.
Reckon Limited (ASX: RKN) – down 22%
Reckon certainly looks cheap after its most recent results and it occupies a lower-cost niche in the market where some larger competitors may not be able to compete. However, the company is heavily in debt and may not be able to invest in the business as much as would be needed to make it a winner. One prominent fund manager also recently sold their stake, which could have shaken the market's confidence. I own one of Reckon's major competitors so I'm not so interested in buying it, but it looks cheap enough to be worth a closer look, especially if it can continue to grow online subscriptions.
iSentia Group Ltd (ASX: ISD) – down 20%
iSentia shares were heavily sold off in the aftermath of the company's results earlier this month, after management wrote down the value of their King Content acquisition to zero. King Content was only recently acquired, and proved to be a major mis-step. Core earnings in the iSentia business also weren't flash, although management continues to see opportunities for expansion in south-east Asian countries like Korea. While revenues continue to grow, earnings before interest, tax, depreciation, and amortisation (EBITDA) have been falling. Without sustainable growth I'd be inclined to avoid iSentia today.
