ETO (Entertainment One) released a trading update today (http://is.gd/Z830vd), sending the shares down 8.4% to 158p. EBITDA was up 15%, but revenues were down 3%.
I wrote about ETO in November (http://is.gd/uCxhZv), when the price was 226p. I did not like it at all: the company earned low returns on capital, had substantial debt, debtors days were rising, and their free cashflow was poor.
ETO attracts a lot of investor excitement. There are investors, much savvier than me, who are positive about it. However, I maintain that there is nothing special about this company. Historically, revenues had grown because the directors have thrown capital at the problem, and done a poor job at allocating it, too. Investors must be disappointed to see revenues declining.
Such a miserly dividend, too; investors should take that as a hint that the free cashflow is worse than the P&L account would have them believe.
02-Mar-2016 Edit: fixed typos and grammar