Recent results / trading updates by companies where analysts believe that the situation to be "not as bad as first thought" has seen crazy spikes in share price that have turned highly expensive, unprofitable companies into even more spicy valuations. Yet, companies that trade on historic reasonable valuations and miss EPS guidance by 1% get absolutely slaughtered.
Take IEL and the multiple headwinds at play through the loss of the monopolistic IELT's platform, political posturing largely due to immigration and lack of housing availability and the outlook looks dire for IEL.
Consider $1b in revenue, double digit operating and profit margins, valuation at 23x with double digit ROE & ROIC (trailing) and then consider what *may* happen to this shareprice after the company reports at months end. Any wiff of "not as bad as we first thought" could see a rerate.
Of course, it could quite easily go the other way. But with a forward PE of 18x it's hard to see a complete implosion. Risk/reward looks evenly balanced.
However, my opinion matters for nothing. I'm just throwing darts.
IEL Price at posting:
$12.18 Sentiment: None Disclosure: Held
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