Why is the market penalising CMC so much. A solid cash rich company !!
RE: CMC Markets (LON:CMCX)
Well, it might have something to do with this week's oddly timed and unexpected profit warning?
https://www.investegate.co.uk/...
Operating income is now expected at £280m to £290m, non-discretionary operating costs at £215m to £220m, you can probably add at least another £5m onto that so net profit somewhere between £75m and £55m or eps between 26.8p and 19.6p, equivalent to a PE of between 8.9 and 6.6. So it's cheap, but could easily get cheaper. The dividend will be cut, but it's never baselined anyway, it goes up and down with earnings.
The wildcard here is Peter Cruddas, who owns 59% of the company. He could probably find the change in his petty cash to buy the £200 million of the company he doesn't already control.
Given the inherent volatility of spread betting companies then visibility of forward earnings will probably remain poor, and the share price will suffer along with it. The investments they're making are aimed at diversifying revenue streams but they're also pushing up costs. Hopefully that's temporary, but costs are expected to increase next year as well.
But one day the bear market will end, punters will decide they're smarter than the markets and the good times will come again for CMC. In the meantime it's cheap and there's the possibility of the company being bought out. The main risk is that could happen at a lower price.
timarr
