The Bapcor Ltd (ASX: BAP) share price tumbled more than 5% to $5.50 over a trading day that saw its management team present to powerful institutional investors at the Morgan Stanley investment conference in Sydney.
The big fall in Bapcor shares is all the more curious given the automobile spare parts and distribution business reconfirmed its guidance for FY 2019 net profit to come in around 9% above the result in FY 2018.
One factor that might be concerning investors is that net debt to forecast EBITDA is expected to be around 2x by the end of the financial year which might be a too much for comfort for more conservative investors.
In turn the stretched balance sheet could force the group to reconsider its dividend policy in a move that is normally guaranteed to send institutional investors running for the hills.
Bapcor’s management also flagged today that the “overall market remains softer than historically” and that competition from the likes of Repco remains strong.
Therefore it’s tough to pinpoint why Bapcor shares tumbled today, but it’s almost certainly related to the interpretation of some pieces of information revealed at today’s Morgan Stanley conference.
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Motley Fool contributor Tom Richardson owns shares of Bapcor. The Motley Fool Australia owns shares of and has recommended Bapcor. 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.