Much to the relief of its long-suffering shareholders, the iSentia Group Ltd (ASX: ISD) share price has been one of the best performers on the Australian share market today.
In morning trade the media monitoring company’s shares are up 30% to 28 cents on the day of its annual general meeting.
Why are iSentia’s shares rocketing higher?
Ahead of its event in Strawberry Hills today, iSentia released a presentation to the market which included an update on its plans and its performance so far in FY 2019.
Management warned that FY 2019 would be a challenging transition year, but reminded shareholders that this is not the first time it has had to deal with a competitive landscape.
It remains confident that it “will overcome these challenges as we have done in the past.”
After which, management expects iSentia to come of the transition as a stronger and more competitive company with improving financial results.
This is because it believes the company offers a compelling business proposition that its customers value. Furthermore, it sees real growth opportunities in the Asia market, underpinning its strong domestic core media intelligence business.
Looking ahead to its full year results, management has reaffirmed its FY 2019 guidance that was provided in August with its results release.
It expects revenue in the low to mid $120 millions range with EBITDA in the low to mid $20 millions range. This guidance range assumes that copyright costs in Australia remain stable during the financial year.
Given the company’s recent troubles and the countless downgrades it has had to make, I suspect that today’s share price gains are a relief rally after management held firm with its guidance.
Should you invest?
While iSentia’s shares would be dirt cheap at these levels if it does deliver on its guidance, I’m still not convinced that it is over the worst of its problems.
In light of this, although it is a very tempting turnaround investment option, I plan to stay clear of its shares and focus on tech companies with stronger business models such as Bravura Solutions Ltd (ASX: BVS) and Citadel Group Ltd (ASX: CGL).
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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 Bravura Solutions Ltd and Citadel Group Ltd. The Motley Fool Australia has recommended iSentia Group Ltd. 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.