The Service Stream Limited (ASX: SSM) share price is being smashed today. Service Stream shares are down 19.94% at the time of writing to $1.37 a share. That’s essentially a 3-year low for the company since it last saw these levels back in February 2018.
Service Stream shares are now down more than 42% since December 2020 and down almost 54% since the company’s last all-time high, which we saw back in August 2019.
So what’s causing this calamitous drop in the Service Stream share price today?
Service Stream share price gets fried
Well, it appears to be a reaction to Service Stream’s earnings report for the first half of the 2021 financial year (1H21) that the company released after market close yesterday. As my Fool colleague James Mickleboro warned at the time, investors were probably expecting a share price fall today after the report dropped last night. But perhaps they weren’t expecting a return to 3-year lows for the company.
We did cover the company’s results yesterday, but let’s go through some of the highlights (or perhaps lowlights in this case).
So Service Stream reported a 17.7% drop in revenues to $409.9 million. That resulted in a 40.5% collapse in net profits after tax (NPAT) to $16.2 million.
To make matters worse for investors, the company also announced that its interim dividend would be slashed by 37.5% to 2.5 cents per share (albeit still with full franking). On the current share price, that would equate to an annualised dividend yield of 3.62%, but only 2.9% on yesterday’s closing price.
Service Stream’s management didn’t exactly calm investors’ fears when they warned that the second half of the 2021 financial year could be just as bad for the company. Management blamed the coronavirus pandemic, along with the associated travel bans, for much of these woes. However, the company’s management was more bullish on the long-term outlook, saying:
The business has a strong pipeline of organic growth opportunities linked to our core markets, and will continue to adopt a measured approach to assessing potential external growth opportunities, ensuring they will enhance the group’s long-term performance.
Evidently, investors are begging to differ.
About the Service Stream share price
The company has a price-to-earnings (P/E) ratio of 11.3 and a market capitalisation of $561.37 million on the current Service Stream share price. Its 52-week high is $2.47 and its 52-week low is now $1.36, just one cent below the current share price.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
More reading
- Why a2 Milk, Service Stream, TPG, & Zip shares are tumbling lower
- Why the Service Stream (ASX:SSM) share price could come under pressure on Thursday
- These are the 10 most shorted shares on the ASX
- These are the 10 most shorted shares on the ASX
- ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post Why the Service Stream (ASX:SSM) share price is down 20% today appeared first on The Motley Fool Australia.
from The Motley Fool Australia https://ift.tt/3kmByI7
Leave a Reply