Why the Experience Co Ltd share price plunged almost 30% lower today

One of the worst performers on the Australian share market on Monday has been the Experience Co Ltd (ASX: EXP) share price.

In late afternoon trade the adventure company’s shares are down almost 17% to 59 cents. At one stage its shares had drifted as much as 29.5% lower to a 52-week low of 50 cents.

Why have Experience Co’s shares plunged lower today?

This morning Experience Co provided a trading update to the market which revealed that the company has been facing tough trading conditions over the last couple of months.

According to the release, unseasonably adverse weather patterns on the east coast of Australia in March and April have led to a serious downturn in customer bookings.

This adverse and damaging weather included rains in Cairns, Port Douglas, and Mission Beach that the ABC labelled “the worst in a generation”.

Because of the adverse weather Experience Co’s businesses lost a significant number of trading days during the recent quarter.

This ultimately means that sales and earnings before interest, tax, depreciation and amortisation (EBITDA) came in well short of expectations during the March quarter. Similarly, the month of April is expected to be just as weak.

As a result, management has been forced to downgrade its FY 2018 guidance.

It now expects revenue to come in between $127 million and $130 million, compared to previous guidance of $135 million to $140 million.

EBITDA has also been downgraded to between $30 million and $31 million from $35 million to $37 million.

Management has warned that this updated guidance is subject to normal weather patterns returning.

Should you invest?

While this trading update is disappointing, it was out of the control of management and appears unlikely to repeat itself in the future.

Based on its revised guidance I estimate that Experience Co’s shares are changing hands at approximately 18x forward earnings.

I think this means its shares are trading at an attractive level and could be worth picking up once the dust settles. Especially considering the inbound tourism boom Australia continues to experience that should drive solid bookings growth in FY 2019.

As such, I would put it up there with fellow tourism shares Crown Resorts Ltd (ASX: CWN) and Apollo Tourism & Leisure Ltd (ASX: ATL) as ones to consider today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia owns shares of EXPERNCECO FPO. 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 Scott Phillips.

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