What does today’s news mean for shareholders of these two stocks?

Shares of NCC (LSE: NCC) have crashed 33%, wiping over £300m off the value of the FTSE 250 cyber security and risk mitigation firm.

In a trading update covering the four months to 30 September, NCC said it had experienced “a number of setbacks in the Assurance Division including three large unrelated contract cancellations, a large contract deferral and difficulties with some managed services contract renewals.”

I was expecting the announcement to continue with a warning on full-year profits. However, management said that the “rate of growth in profitability will now be more biased towards the second half of the year than initially expected, but remains in line with the board’s expectations.”

Lack of earnings visibility

Clearly, the market isn’t convinced — and rightly so in my view. Despite NCC operating in a growth industry, I’m wondering whether the contract problems are merely an unfortunate cluster of one-offs or a precursor to more challenging times ahead. If the latter, a profit warning would be almost certain in the coming months, and expectations of mid-teens earnings growth this year and next would go out of the window.

NCC has commanded a premium rating on the basis of its earnings growth, and even after today’s nosedive in the shares, the P/E is still relatively high at 18. There’s potential for the shares to fall a lot further, if we get the toxic combination of a profit warning and the market deciding the company merits a lower earnings rating.

Due to the lack of earnings visibility, I think NCC is a stock to avoid for the time being.

Creating shareholder value

One company with more positive news this morning was Optibiotix Health (LSE: OPTI). This AIM-listed firm has a growing portfolio of patents on compounds that change the way microbes in the body work and interact.

For example, it has compounds that reduce cholesterol, for which there’s an option agreement with “a multinational consumer goods company” (rumoured to be US giant Procter & Gamble) and compounds that tackle obesity, for which there’s a commercial agreement with the owner of Slimfast.

In fact, Optibiotix now has four distinct divisions and while progressing commercialisation, is also looking to create shareholder value by potentially giving each division a separate public listing.

Today’s news was of an increased investment in its majority owned SkinBiotix joint venture to “complete the development and human studies for the first product application, in addition to funding activities to support an initial public offering.”

Speculative buy

Today’s announcement from Optibiotix is another promising development, but the market is becoming impatient for some really major commercial news. The shares have drifted lower in recent months and have edged down again today to 67p, valuing the company at £52m.

Optibiotix clearly has genuinely valuable intellectual property, interested commercial partners and potential to earn significant revenues from a small royalty on the huge volumes of products shifted by fast moving consumer goods companies — as well as opportunities in such areas as healthcare-acquired infections and wound care.

For these reasons, I continue to rate the stock as one of the best buys at the more speculative end of the investment spectrum.

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