Buy Or Sell? Cambian Group plc Down Over 30%, Servoca Plc Up More Than 20%

Should you buy or sell these 2 major movers? Cambian Group plc (LON: CMBN) and Servoca Plc (LON: SVCA)

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in health services company Cambian (LSE: CMBN) have collapsed by as much as 47% today after it released a profit warning. The behavioural health specialist stated that underlying EBITDA (earnings before interest, tax, depreciation and amortisation) for the full year will not be less than £54m which, while it represents growth of 7.5% versus the previous year, is well short of previous guidance.

The reasons for the reduced forecast in profitability for the company are a significant increase in organic investment in new places, with capital expenditure of over £50m expected for the current year which is set to cause increased development losses. Furthermore, Cambian is also feeling the impact of staff vacancies which has reduced the number of admissions to its schools and children’s services.

Clearly, today’s update is hugely disappointing and investor sentiment has been dealt a major blow. However, Cambian is still set to make strong progress, with it due to deliver growth in the current year and, looking ahead, it expects that further investment in people and in its systems will underpin growth in 2016 and beyond.

In the short term, though, its shares could come under further pressure as the market digests today’s news flow. As such, it seems to be a stock to watch, rather than buy, until more information is gleaned regarding its ability to meet its future guidance.

Meanwhile, recruitment and outsourcing specialist Servoca (LSE: SVCA) has seen its share price soar by over 20% today after upgrading its guidance for the full-year. The company has stated that it now expects results to come in significantly ahead of expectations due to strength in both of its key divisions.

In the Education recruitment business, the crucial September month was hugely positive and Servoca now expects it to beat internal targets in the coming months. Furthermore, the Healthcare recruitment business carried strong momentum into the second half of the year and this pace of growth has accelerated, with the contribution to the company’s profitability from this space continuing to rise.

Looking ahead, Servoca was due to post a rise in earnings of 39% in the current year, which it now expects to beat. And, with further growth in net profit of 40% being pencilled in by the market for next year, it appears to be in the midst of a period of exceptional growth.

Despite this, it trades on a price to earnings growth (PEG) ratio of only 0.5 (using the lower growth forecasts which do not reflect today’s announcement) and this indicates that Servoca could be set to continue the run which has seen it soar by 83% since the turn of the year. Certainly, its shares could continue to be volatile but, for long term investors, they appear to be worth buying at the present time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »

Investing Articles

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »