Shares in marketing specialists Creston (LSE: CRE) have nosedived in Tuesday business following a disappointing financial update, and the company was last 15% lower from yesterday’s close. It had plunged to levels not seen since October 2014 earlier in the session.
The London-based business advised that like-for-like revenues had edged just 1% higher between April and September, to £37.7m. The impact of a weak euro, and what it described as “client budget weaknesses” caused first-half activity to slow, Creston noted, forcing the business to swallow a 73% pre-tax profit slump, to £1.1m.
The company has suffered from the impact of weaker trading by a small number of its larger retail and consumer tech clients, while changing advertising strategies from its healthcare customers has also hampered performance more recently.
On top of this, Creston endured a £2m impairment related to the closure of research arm FieldworkUK.com. All in all Creston now expects results for the 12 months to March 2016 to slightly miss previous predictions.
So is Creston a ‘buy’?
Well today’s news comes as somewhat of a shock, naturally. But more optimistic investors will point to Creston’s great track record of securing blue-chip customers and brands, a promising precursor to long-term growth. Indeed, the business signed up Logitech and Costa during the last six months, and Canon, Danone and Diageo all awarded Creston new work.
The City expects Creston to chalk up earnings growth of 6% and 5% for the years to 2016 and 2017 respectively, leaving the business dealing on ultra-cheap P/E ratings of 10 times and 9.5 times. When you factor in chunky dividend yields of 3.2% and 3.4% for these years, I believe current share price weakness could represent a lucrative dip-buying opportunity for patient investors.
Iodine play shaken up
Likewise, investor appetite for Iofina (LSE: IOF) has fallen off a cliff in Tuesday’s session, the iodine producer plunging to record lows before recovering some ground. Still, the business is currently trading at an 14% deficit to levels punched at Monday’s close.
Iofina advised that an earthquake close to one of its plants in northern Oklahoma has led the Oklahoma Corporation Commission to reduce water supply for chemical production. Although Iofina commented that “the ramifications for the Company’s iodine production are not certain,” it estimated that crystalline iodine output could fall by between 10% and 20% per year across its five facilities.
So is Iofina a ‘buy’?
Given that Iofina’s assessment of potential disruptions is unclear, cautious investors will take the company’s assertion that production should still hit 260 to 300 metric tonnes between July and December with a pinch of salt.
Iofina is already expected to extend its poor earnings story for a little while yet, and losses of 120 US cents per share are currently pencilled in for 2015. And although the City expects the business to finally bounce into the black next year, the impact of current production problems could easily put these projections to the sword.
