Why Integrated Research Limited (ASX:IRI) shares have been crushed today

It certainly has been a disappointing end to the week for shareholders of Integrated Research Limited (ASX: IRI).

In morning trade the shares of the leading global provider of experience management solutions for critical IT infrastructure, payments, and communications ecosystems have come crashing down.

At the time of writing its shares are down a massive 26% to $2.22.

Why have Integrated Research shares come crashing down?

After the market closed on Thursday the company released a profit guidance update for FY 2018.

For the 12 months ended June 30, management expects the company to report revenue in line with FY 2017 and profit after tax growth to be up between 1% and 5% year-on-year.

This is especially disappointing given that in the first-half the company reported a record interim result with profit after tax increasing by 20% on the prior corresponding period to $9.3 million.

The weak result has been blamed on the cyclical downswing in Infrastructure and an underperforming European operation.

While management admits that the result is disappointing, it has stressed that the fundamentals of the business remain sound with stronger licence growth anticipated for the new financial year.

Interestingly, in March non‑executive director and chairman Steve Killelea sold 15 million shares (albeit to partly fund philanthropic endeavours) through on-market trades.

And in June the company was sent a price query by the ASX after its shares fell from a high of $3.70 to $3.05 in the space of two trading days on the back of no news.

Management advised it was not aware of any reason for the sudden decline, but it certainly doesn’t look good in hindsight.

Should you buy the dip?

There’s no doubt in my mind that Integrated Research is a quality company which could be an attractive long-term investment, especially after this severe share price decline.

However, I intend to hold off buying the dip until I’ve seen an improvement in its performance in the first-half of FY 2019.

Until then, I’ll focus on tech shares such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

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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 Altium and Appen Ltd. The Motley Fool Australia has recommended Integrated Research 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 Scott Phillips.

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