Archived article
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magazineContract concern hits Alfa Financial
Alfa Financial Software (ALFA)
Loss to date: 20% (stopped out)
Original entry price: 482.75p, 3 August 2017
A high valuation left our positive call on software firm Alfa Financial Software (ALFA) vulnerable to disappointing news and this was reflected in a big sell-off for the shares in response to its 2017 results (8 Mar).
More specifically investors were concerned about the timing of new contracts after the company said revenue growth would be weighted to the second half of this year.
The takeaway seemed to be that several new large contract implementations would take longer than initially expected and this could pressure profitability in 2018.
The subsequent 20%+ drop in the share price seemed to be out of kilter with the scale of resulting downgrades. For example, stockbroker Numis cut its earnings forecast for 2018 by less than 5%.
One explanation behind the large drop was the fact that the shares were trading on a very high rating of nearly 40-times earnings.
Companies on such high ratings tend to fall fast on the slightest bit of bad news.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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