The month of February has proven to be a difficult time for a certain London, England-based company. In fact, Capita PLC (LON:CPI) (OTCMKTS:CTAGY) has struggled over the course of the last year, witnessing its shares drop by 62% in that timeframe. Some investors have stated that Capita could see further difficulties down the road, while others think the company might be able to deliver a successful comeback. So, who’s correct?
What’s Been Going On?
So far in 2018, Capita has witnessed two massive drops in its stock price. On January 31, the stock plunged after the company disclosed that it is going to stop dividend payouts. The stock dropped nearly 50%, and why? Primarily because investors hate when companies halt dividend payouts. Then, on February 8, the stock continued to drop, trading down almost 5%. It appears today, February 13, will not be any different.
As of this writing, Capita is trading down 4.03% on the London Stock Exchange. Based on this month’s trading results, it would seem that Capita is going to continue to struggle as we progress forward. Some will disagree; there will be a handful of people that argue that because Capita has a new management team, the U.K.-based company will now be pointed in the right direction. That’s questionable though when looking at the company’s prospects of late which appear very challenging.
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What Does the Rest of the Year Entail?
In 2018, Capita is forecasted to report a bottom-line decline of 34%. To top it off, the company is forecasted to report a decline of 3% in 2019. As for the company’s new management team and its turnaround plan, it’s a positive move, but when all’s said and done, this turnaround could take a number of years to really get off the ground. For instance, it takes quite a bit of time to change and reorganize a company’s asset base.
The Takeaway
It’s hard to say if Capita will make a comeback. Hiring a new management team and coming up with a turnaround plan is definitely a step in the right direction. Plus, the company has a P/E ratio of around 6, which indicates investors are applying a wide margin of safety. That said, it could also prove itself to be a value trap. Additionally, Capita’s issue is that a turnaround plan can take a long time to actually get into motion. Until then, it seems like the stock price is only going to continue to drop.
At present time, it might be beneficial for potential investors to avoid this stock. However, keeping a close eye on Capita’s stock over the next period, in case its turnaround plan is successful, might be the wisest choice.
Featured Image: twitter
