Good morning! It's Friday so a quiet day for news, and I'm also running at a more leisurely pace today.

 

 

Tribal (LON:TRB)

This educational specialist issues an IMS today, which has clearly not impressed the market, as the shares are currently down 7% to 186p. Although I have found recently that small caps can sell off on satisfactory news - since people seem to be looking for any excuse to bank profits and move on.

Checking the archive here, I last reported on Tribal on 16 Jan 2014, when they had issued a positive trading update. Although it noted that the order book was down 23% due to their Ofsted contracts maturing. I concluded that at 206p the shares were fully priced.

Today's statement introduces an element of doubt over this year's performance when it says;

 

As a result of anticipated timing of some important contract closures and software installations, our profits in 2014 will show a greater weighting towards the second half of the year than in 2013.  We remain confident of the outturn for the full year.

 

The order book has continued to decline, and is now £113m (31 Dec 2013: £127m), with the same reason given again - maturity of the Ofsted school inspection contracts.

I think the market is sensible in reducing the share price somewhat, as this is essentially a mild H1 profit warning, in the hope that they can recoup the shortfall in H2. Therefore there is an increased risk that something will go wrong in H2 also, and mean they miss targets for the full year.

As such in my view a more modest rating is called for. I'd put it on a PER of say 12 times current year consensus forecast EPS, which equates to a share price of 152p. Therefore at 186p these shares don't look good value to me. That looks too high a rating given the uncertainty over this year's performance. It might turn out to be fine, and they could hit this year's figures, but why take the risk by paying a full price for the shares now?

Looking at the two year chart below, these shares have had a very good run, and 200p looks like a barrier that has been capping the upside for eight months now.…

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