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Well, what a bl@@dy awful mess since I last looked in on my little fav, CLX! Geezalou!!!
In the early days when this forum was just a few months old, I did opine that the PE ratio was too high and therefore far too rich for me - and soon regretted not buying, when I realised bona fide growth stocks are allowed to sport high PE ratio’s - as long as they deliver the goods.
Deliver the goods? Well that’s not gonna happen for the next year or two. If it was too high back then, it’s current forward PE ratio is in Tesla-type stratosphere heights of fancy. It’s showing a forward PE of just under 70 based on the new future reduced earnings guidance. Anyway, let’s get the bad news out of the way.
I believe 48p was the CLX’s IPO launch price - so as of Friday, it’s back to the starting grid and Day-One, all over again.
I’m seeing fair value given in some quarters via the DCF metric as a staggeringly low 12p. I would tend to double that to 24p as a potential low as it’s not uncommon for many IPO’s to fall to half their launch price within their first 3 years, before continuing.
Earnings are forecast to drop from last year’s all time high of £5.91m, to £1.35m for ‘24
- with 2025 showing even worse, of only £0.2m !
That’s the second profit warning this year so the SP will be v unreliable for the next 12 months. True Long term holders can buy the dips (small amounts each time as SP unreliability makes the floor questionable in that 12 months).
Although the RNS said:
“REVENUE FOR FY24 WILL BE IN REGION OF 20-30 PER CENT BELOW
CURRENT MARKET EXPECTATIONS
IN FIRST SIX MONTHS OF FY24, COMPANY'S ORDER INFLOW HAS
REMAINED
AT SUBDUED LEVELS
H2 FY24 WILL BE SLOWER THAN ANTICIPATED.
CONFIDENT IN A RETURN TO GROWTH IN FY25 “
- the market has already decided and forecasts for ‘25 are for a measley £200,000 in earnings.
So anyone’s guess when a bounce may occur. No doubt there will be ultimately - but not in the next 12 months, barring occasional short-lived false-positive rises.
This is beyond the control of the company, so not a management fault issue. All companies go through these swings. It’s not an insolvency issue.
Have a plan if buying dips - not gut feelings or endless random guesses of: “This is the floor”.
The company will survive this but clearly it’s going to take a year or two. Profit warnings nearly always turn out to be worse than the initial RNS leads you to believe. The forecast guidance for ‘25 earnings is truly shocking. Wasn’t expecting that.
Still have a soft spot for CLX -
BUT first things first - the H1 trading update will be published next month round about the 21st November. All market forecast guidance will be revised by the market after that is received.
Even if I wanted to buy right now - I would never buy before a trading update is due to be released, unless I had some sort of information that no one else had.
Where are you getting your earning figures from?
Earnings? - from Stockopedia (subscription access only).
Sharepad is the main alternative, but that’s even more expensive!
I did trial Research Tree (analysts) for awhile, but was running up too much expense, so cancelled it.
I’ve been with Stocko since 2016 and on the whole have come to trust their data.
- - - - - - - - -
You can get very limited free access though, to things like Simply Wall Street.
Here’s a couple of current copy/paste snippets from S/WStreet on Calnex:
Highlighted with a red warning is -
“ Earnings are forecast to decline by an average of 88.9% per year for the next 3 years “
&
“New major risk - Revenue and earnings growth”
Earnings are forecast to decline …for the foreseeable future.
This is considered a major risk. Ultimately, shareholders want to see a good return on their investment and that generally comes from sharing in the company's profits. If profits are expected to decline, then in most cases the share price will decline over time as well.
This is currently the only risk that has been identified for the company.”
Just before I sign off and leave you in peace, a quick note on a fluctuating SP for the next 12 months.
First thing is, I’ve come to strongly believe that after a negative trading update, it only qualifies as a genuine profit warning if the SP drops at least 20% - on the day of the announcement!
(I’ve often seen x40% drops on the day of the announcement, but the research papers/ebooks say to expect a minimum of x15%). I’ve always found in general it’s a lot more than x15% so just rechecked Oct 10th SP to be sure
- it opened at 94.6 and closed the day down at 66
- so that’s the top side of a clear x30% drop in one day, easily beating my preference for a 20% drop. So no doubt about it.
2nd thing now the SP is definitely a victim of an official Profit Warning is that the SP will attempt to rise over the next 12 months but it will be quote: “unreliable”.
Some may attempt to draw new conclusions if it rises considerably - and here is the 2nd point - it’s my highly personal opinion - you won’t find it any research papers, it’s my own observations over the years - no matter how high the SP rises I’ve always found it never exceeds past the SP that was present on the day before the announcement - (for the next 12 months) - and that was a very flat open-and close of 95p.
(If it does - please hunt me down and haul me back here, as it will aide my own research).
What that means is, I can certainly entertain the notion that over the next 12 months the SP may visit the 50’s, 60’s, 70’s or the 80’s - but in my opinion it will never exceed (or reach) the SP that prevailed on the day before the Profit warning was issued - which as said was sitting at 95p all day.
My opinion? The SP may never reach 95 let alone exceed past it - at least for the next 12 months. (Hope I don’t come to regret saying that :)
And any further downside to the SP from here? - well that is anybody’s guess. The situation is too unreliable to be more confident.
So it's just made up and not company-given guidance.