The Accesso Technology (LSE: ACSO) share price had been pretty much a poster child for successful growth stock investing, with the company’s shares five-bagging in the five years to September 2018.
But then the wheels started to come off. Since then, the share price has crashed 75% — including a 15% fall on the morning of the company’s 2018 full-year results Wednesday.
At their peak in 2018, Accesso shares were trading on a trailing P/E of 70, and on a P/E relative to forecasts of 60. After their five-bagging performance, in my opinion that was just plain nuts.
Since then, reported figures have been merely very good rather than out of this world. And as is almost always the result of a growth slowdown, the get-rich-quick brigade, whose eyes were on the stars rather than on fundamental valuations, ran off in search of their next bandwagon.
Good results
Meanwhile, 2018 brought in another set of impressive results. Revenues rose by a fairly modest 15.5%, and though reported operating profit fell by 38% (there have been accounting standards changes), the adjusted figure rose by 26%. Adjusted earnings per share gained 41%.
Net cash, however, pretty much disappeared, with just $0.5m on the books from $12.5m a year previously.
It’s difficult to analyse the firm’s underlying performance at the moment as it’s been in a strong acquisitive phase, and I’m always cautious of companies possibly over-stretching themselves in a relentless pursuit of growth.
But we’re still looking at double-digit EPS growth forecast for the next two years, which would take the P/E down to 11 by 2020.
I’ll want to dig deeper, but I’m starting to see Accesso as a tempting share price recovery candidate.
Accounting
Over at Goals Soccer Centres (LSE: GOAL), the “leading operator of outdoor small-sided soccer centres” has problems of its own.
Listed on the Alternative Investment Market (AIM), Goals’ shares were suspended on Wednesday morning at the request of the company because of historical accounting errors.
We had previously been made aware that “the board now expects the 2018 full-year results will be materially below expectations,” and the shape of the shortfall is becoming a little clearer.
After working with auditors, Goals has now “concluded that there has been a substantial misdeclaration of VAT, going back over several years.” A provisional figure of approximately £12m is being suggested, though the final value is still to be determined. The firm intends to engage promptly with HMRC and is in talks with its lenders aimed at agreeing new facilities.
Lessons
I really can’t say anything about Goals itself at this stage, but I think there’s a general lesson for investors — be extra cautious when investing in AIM stocks.
It’s always been difficult and costly for small companies to get themselves listed on the London Stock Market and raise capital, and that’s why AIM was launched in 1995. It imposes what could be kindly described as a “more flexible” regulatory system, and that’s helped get many successful companies off to good starts.
But with less strenuous oversight, accounting errors can be larger and more frequent — and AIM is also less resistant to fraudulent practices.
I’m not saying don’t invest in AIM stocks, but I’d only ever commit a small portion of my investing cash to them.
