All ASX 200 shares can fluctuate up and down in the short term.
But for long-term investors, this has no bearing on the upward direction they'll eventually head in if the stocks represent quality companies.
The team at ECP Growth Companies Fund last month saw one of their S&P/ASX 200 Index (ASX: XJO) holdings plunge and another soar.
But they back both of them equally for the long run:
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'A business with high barriers to entry'
There is no getting around that May was a horrible month for IDP Education Ltd (ASX: IEL).
The share price tumbled 22.5% in a horror show from the international educational services provider.
The catalyst was obvious for ECP analysts.
"IDP Education underperformed as the Canadian government opened up its SDS immigration visa requirements to 4 new English language tests, increasing competition for IDP's IELTS [International English Language Testing System] business," they said in a memo to clients.
"It is uncertain how much market share IELTS could lose over the next few years, however market estimates point to an 8% to 15% EPS impact."
But the ECP team's outlook remains that IDP shares are likely to head up in the long term, rather than down.
"While this is a negative development, IELTS remains a business with high barriers to entry that are not just regulatory in nature," read the memo.
"There is a large ecosystem of referral partners and test preparation providers surrounding the IELTS test that we think will ultimately limit the impact."
It's not just the English testing that's a reliable earner for IDP.
"We are also positive on the company's competitive position with the recent launch of One Skill Retake as well as the favourable equivalency ratings of the IELTS test."
Many investors have agreed with ECP analysts, sending the stock back up 9.4% this month.
Cash burner to cash producer
Shares for virtual network provider Megaport Ltd (ASX: MP1) have had an incredible run lately.
Since 27 April, the stock has climbed a phenomenal 88%.
The ECP team noted there were no announcements from within the company that could have caused the share price to rocket 21.1% last month.
"Megaport Ltd outperformed on no news flow following the release of its 3Q results the month prior," read the memo.
"Monthly recurring revenue accelerated in 3Q, growing 14% QoQ. This was driven by higher yield primarily, due to Cloud VXC repricing implemented in March."
Like many technology companies, Megaport used to be a money burner that has attempted to steer itself to positive cash flow territory over the past year.
That move seems to be heading in the right direction, with management even making an unprecedented announcement to the market.
"Megaport issued guidance for the first time, expecting EBITDA of $16 million to $18 million in FY23 vs consensus of $9 million, and $41 million to $46 million in FY24 vs consensus of $30 million, driven by cost-cutting initiatives."
