The Appen Ltd (ASX: APX) share price has plummeted today after open, on the back of the company releasing its half-year results (six months to June 30) before market. APX shares opened at $29.02 this morning but have since slid to $24.26 at the time of writing – a drop of 11.25%
What were Appen's results like?
To put it simply, they were good – really good. Revenue was up 60% to $245.1 million while underlying earnings (EBITDA) were up 81% to $46.3 million. This translated to a net profit after tax (NPAT) of $29.6 million – which was up 67% over the prior corresponding period.
Appen's interim dividend will remain unchanged at 4 cents per share – partially franked.
Why is Appen's share price plunging then?
Well, from where I'm standing, its all about perceptions. Appen, as part of the WAAAX family, has the burden of delivering the world to investors each and every time it reports. Even after today's share price plunge, Appen is trading on a price-to-earnings ratio of 64.5 (the market average is currently around 17). This means that all things remaining equal, it will take almost 65 years to make your money back on an Appen investment today (assuming Appen stops growing today).
Of course, investors are pricing Appen this high because they are assuming record growth numbers for the foreseeable future. But today's share price moves are a sign that investors got ahead of themselves. After all, it's pretty unusual to see a double-digit slide after a company posts profit rises of 67%.
Another factor might have been the dividend. Investor's had been hoping for a bump from 4 cents per share to 5, but Appen has elected to keep the payout steady. Of course, no one is buying Appen shares solely for the yield (currently around 0.32%), but many investors may have been banking on Appen becoming a strong dividend growth stock – and dividend growth stocks don't keep their payouts steady.
Foolish Takeaway
Today's moves highlight the dangers of investing in WAAAX growth shares at current levels. The prices are so frothy that any (even perceived) missteps are heavily punished by the market, as we have seen this morning. On the other hand, Appen shares are now substantially below their 52-week high of $32, so it may be a good time to buy if you're feeling brave.
