There is an extraordinarily long list of reasons why people might sell shares. For this reason it is impossible to speculate for which reason a given seller may be making their decision. Nor can we speculate whether a group of sellers is selling for the same reason as each other. And then there are those who are facilitating the transaction - the buyers, same problem.
This is why it is really important to make an assessment of the underlying value of the business. However it is impossible to make an estimate of the value of the company when all you have got is the price.
Engenco, in the absence of market updates, reports twice a year, that is 1/2 and full year results. As investors we can only adjust our view of the company at these junctures.
So, based on what we know (2018FY results) at 41c per share we can calculate the following valuation ratios:
It is important to note that the company currently receives significant tax benefits from historical losses carried forward that will cease sometime in the future, accordingly PE is not a good comparative guide (cash flow will also be affected). However, for any company and in any industry these are extremely low valuation multiples. So one must imply that the current price is building in a significantly lower profit (and ongoing lower profit), or the market is undervaluing the business.I have re-read the outlook sentiments in the most recent half year report and am inclined to think it's the latter. But as an investor I am comfortable looking through a flat spot (which all must have) if nothing has changed with the durability of the business model or the integrity of management.
EGN Price at posting:
41.0¢ Sentiment: Buy Disclosure: Held
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