Six months ago I commented on Software & IT services company SDL, and promised a follow-up. Hence this post.
I am predicting that the share price will be lower in 6 months time than it is now. Stay tuned, and we’ll see how well that prediction worked out.
The shares were 497p at the time, a drop of 22% as a result of its half-year report. They are now 463p. I am pleased to report that my prediction was correct.
I made the following comments:
Stockopedia categorises the company as a High Flyer. Given the price action today, the categorisation should be ignored. The combination of high PE rating and bad market reaction would cause me to sell the shares if I held them. Its low ROCE does not help, either.
Stockopedia now classifies it as a falling star. Their system works!
There is an important lesson here: when there is a significant drop on news, high flyers on hefty valuations, it often pays to cut your losses.
I notice that one are that SDL specialise in is “language translation technology”. At the risk of receiving a lot of flak, this strikes me as “goofy”. It reminds me of HP’s acquisition of Autonomy, the latter of which specialised in the “analysis of large scale ‘unstructured big data'”. It turned out to be a mess.
Stay safe out there.