This is the main reason I don't like pre-announcements. On May 12th at the annual shareholder's meeting, the company predicted an earnings increase of 60% on a 50% increase in revenues.
Here's my problem .... Why do companies make projections? Let's say for example that CADE does not make the forecasted projections. One would have to assume that the news about the increase in earnings and revenues are already factored into the stock. If revenues and earnings only increased by say 30%, then the stock is going to take a hit. A prime example is American Eco(ECGOF). Company kept on saying they were VERY comfortable with the 1.20 forecasted estimates for a few months. They pretty much stated that it was basically going to be "no problem." Well, they didn't come close and the stock has tanked from $14 to $6 sporting an incredibly low P/E of 7.
My point is basically this, if ECGOF hadn't made these unachievable announcements, then the stock would probably be trading in the $12-$14 dollar range and sporting an industry average P/E of about 20. Instead, they got punished by the street for fibbing and it will take a long time for the stock to recover. Ask American Eco what they are expecting nowadays, and they simply say, "no comment." Something they should have done a long long time ago.
As for Cade, if they don't hit the forecasted numbers, the stock will absolutely get punished and their P/E will be much lower than the industry average. Needless to say, so will their stock price.
On the flip side, maybe CADE mgmt. was giving very conservative numbers. I certainly hope this is the case..... |
