Hansen Technologies Limited (ASX: HSN) lost one-fourth of its market capitalisation on Friday morning on an earnings downgrade. The stock fell 25% to a nine-month low of $3.31.
Hansen is a customer care and billing software provider to energy, telco and pay TV companies around the world. It had an outstanding share price run, up 375% in the last 5 years.
The company revised its FY18 revenue forecast to $230 million with EBITDA of $58 million. This compares unfavourably with the previous forecast, which included a similar figure for revenue, but a higher EBITDA margin, which implies earnings were downgraded by 8%.
The company attributes the downgrade to a licence fee that, contrary to expectations, won’t be recognised as revenue this year, a one-off restructuring charge on the recently acquired European utility software provider Enoro, and an underperforming call centre contract – now terminated.
Hansen points out that the new guidance still represents a significant improvement from last year, with revenue up 32% and earnings up 26%. Based on the company’s EPS forecast, the stock trades at 18x earnings after today’s tumble.
What is perhaps most worrying for investors is that the company doesn’t expect the high level of project revenue achieved this year to be maintained throughout FY19.
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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Hansen Technologies. 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.