A little over 2.5 million shares have traded since that disappointing EPS report, and it's probably largely institutional. That would account for about one-half of all the institutional holdings. It's pretty rare that you see an entire liquidation by all big holders, so I don't think you will see another 2.5 million shares sold, but I would not be surprised by another one to one and a half million shares being dumped. It's not an easy stock to get out of and takes some time. If it were a disappointing report from IBM or Apple it would be over in a couple days or at most a week. Here it could take a couple months w/the process finishing by about year-end is my guess. Fresh start for a new year for many who will decide to sell, in a less volatile investment alternative.
That's a pretty good point and I won't disagree w/that. But my point is that there are hundreds of companies for institutional investors to choose from where they do not have to deal w/this magnitude of quarterly earnings variability, or with the issue of revenues and costs being matched appropriately in a timely manner, where every single earnings release does not seem to be a total guess as to what you will see. You can have great technology, record backlog, surging bookings but you will never ever get the multiple on earnings until your earnings stream becomes reliable and your quarterly earnings progression shows some consistency. Maybe they get to the point where they can earn $2.00 per share in a year, but you would like to be able to put more than a 10 multiple on the earnings a few years down the road. You can't do that w/o reliable numbers you can believe in. The big boys don't like roller coaster rides.
By all accounts they have a terrific product (Helix) rolling out, and a de facto endorsement from GM w/the new Corvette line. But just look at the quarterly numbers going back over the last several years. They are all over the place. I realize the business may be cyclical and order or delivery or installation timelines can be lumpy, but they really need to do something about that quarterly volatility. And they absolutely have to match revenues and expenses in a timely manner, at least in the same quarter. Every quarter seems to be a surprise from these guys, both positive and negative. Even earnings release date has to be accompanied by a bottle of Pepto Bismol. Better operated as a private entity IMO where they would not have to issue quarterly reports, or as a part of a much larger corporation where the quarterly volatility would be easily absorbed and little noticed.
Do you really trust the quarterly earnings reports from this company? Do they really pass the "smell test" or do you get the feeling they are just "spitballin" it from quarter to quarter and taking their best guess on the numbers?
Because of the quarterly earnings variability/volatility it is very hard to see how you get more than a market multiple on earnings. The best case is that they sell the company to realize the true business value inherent in the leading edge technology rather than hoping for stock market value which could prove elusive.
How you going to do that when you cannot trust the numbers? One man's timing difference is another man's lack of transparency and yet another's accounting "issue". Institutions are not going to want to be bothered with such nonsense.
in two weeks. And the market has not even entered a correction phase yet. And the volume in this stock is not yet indicative of capitulation. The large institutional holders should be asking some tough questions and pushing back against the company very hard. I suspect margin calls and fear have wiped out most retail positions in the stock already. It's a shame because it did not need to happen had the company had better internal control of matching its revenues and costs. I suspect most big companies have entire staffs or internal accounting departments managing and monitoring this stuff and riding herd on their outside contractors to minimize the surprise effect.
Like I said, I believe they did follow GAAP like they indicated. But the market action tells you it perceives a problem here in the matching of revenues and costs that needs to be dealt with, even if GAAP principles are being followed. Revenues and costs need to be matched in the same quarter, the timing differences issue needs to be resolved . You simply cannot have this kind of quarterly earning volatility due to timing differences, or no matter how good you numbers are, you will not get a reasonable multiple to go with it. Although entirely coincidental, it is unfortunate the CEO and CFO are retiring in the midst of this hailstorm. The company could use every good bit of optics it could get now. I have given up ever trying to predict when some market stock pricing action is overdone. I only know that gaps almost always get filled and markets are prone to excess.
It's a brutal, but entirely expected decline. Hard to have confidence/trust in any numbers. When was the last time the hairs stood up on the back of your neck like this? I can remember a couple of investments that did that, and it didn't end happily.They probably will need to just sell the company now as this kind of "taint" is almost possible to overcome in the investment community. How can you believe any number they put out will include everything that should be allocated to it?
It's rare you see a bloodletting that is this quick and unrelenting w/no bounce. And a tad ominous too. Nearly $6 per share straight down w/o even a pause. When you cannot match revenues and costs in a timely fashion, everything becomes suspect. You become tainted in the stock market. Fund managers follow an overriding rule of prudence. You quite simply become uninvestable.
With a debt-free Balance Sheet, net working capital of about $5 per share provides downside support at that level. The earnings in fiscal 2014 may be about flat w/last year. FY 2104 has started off w/ a first quarter loss and the year-ago fiscal 4Q is an especially strong and difficult comparison. A large order for fiscal 2014 has slipped to the back half of the year, so fiscal 2014 2Q will be underwhelming as well.The stock price at this time last year was in the $5s. Backlog is a bit better so maybe a little north of $5, but the earnings are just as volatile and unpredictable as ever. The market has delivered a swift verdict on the inability to match revenues and costs in a timely matter. Forward numbers will be subject to "a grain of salt" for a very long time. The company is just all over the place with its quarterly results. That may be ok if you own the business, but Wall St. hates that.
Job #1 for the new CEO has nothing to do w/Helix. It has everything to do w/getting a CFO on board who can clean up this mess and put a structure in place so that it never happens again. That may mean bringing in new outside contractors, putting contractors on notice that if they do not file invoices in a timely fashion they will either not be paid or will be dropped, and introducing a rigorous job-costing program. It could take a long time to re-build credibility w/investors, and there has to be the will there to do that in the first place. I do agree the company has put itself in a vulnerable position vis a vis a takeover, which might be the best outcome for shareholders. This kind of volatility is not suited to small standalone companies. Just imagine if the Balance Sheet was not pristine, or the backlog was not at a record, or bookings were not higher across all geographic segments.
The lesson you learn here is that institutional investors will flee at the very first sign something causes the hairs on the back of their neck to stand up, upsets their gut, or stinks. Not matching costs and revenues in a timely fashion is a huge deal, a really, really huge deal. When the CEO and CFO retire simultaneously to that, some of the big holders will definitely shoot first and ask questions later. There are just too many other opportunities out there in a raging bull market w/o such complications where you don't need to rationalize away something that does not feel right.
They shouldn't even call the next quarterly report an earnings repot. They should call it the Fiscal 2Q earnings guesstimate, with guesstimated numbers.
Remember, this is the second time in two years that institutions have been very badly burned by a stock price run-up following a blow-out quarter, only to see it all reversed the subsequent quarter. PRCP is out of "free passes" just because the technology is terrific and the balance Sheet is clean. They simply cannot put forth consistent quarterly earnings numbers.