The Eclipx Group Ltd (ASX: ECX) share price rocketed 9% higher yesterday despite minimal company-specific news – so could the company's equity continue to soar?
What's been happening with Eclipx?
The Eclipx share price fell 42.3% in just one day after a weak trading update and the abandonment of a planned merger with McMillan Shakespeare Ltd (ASX: MMS) in late March.
The vehicle fleet leasing company reported net profit after tax and amortisation (NPATA) had fallen 42.4% compared to the first 5 months of FY18 and that it could not provide full-year guidance for FY19 at the moment.
The company also announced that its financial performance had "softened" since its 29 January 2019 update as Grays Industrial and Insolvency segments continue to underperform, and it is looking at divesting non-core assets.
Both Eclipx management and McMillan Shakespeare announced that a planned merger was "unlikely" as McMillan pointed to several key issues in Eclipx's trading update including the NPATA decline and ongoing underperformance.
Could yesterday's rebound continue in 2019?
While the Eclipx share price has bounced back to $0.905 per share from as low as $0.57 per share on 26 March immediately following the announcement.
However, while there is evidence that investors initially overreacted to the news with Eclipx since providing an update with a more clear-cut turnaround path, I think there are still headwinds for the stock.
The share price should see elevated trading volume this morning following the after-market announcement that its CFO Garry McLennan has advised the Board of his intention to retire from the company in 6 months, or earlier if a successor is appointed.
It will be interesting to see how the market takes the news given this type of news is usually received quite negatively, particularly in the context of Eclipx's recent financial woes.
Personally, I would be holding out until Eclipx releases its FY19 results in August before jumping into the stock with the obvious disadvantage of potentially missing the rebound from what I see as an overreaction to the March announcement.
For those who want to look for growth outside of the Financials sector, this top-rated stock could boost portfolio gains as it continues to soar in a $22 billion industry.
