In line with the more intrinsic analysis of this thread I also wanted to post this - a retrospective view from The Bull from July 2016 by Tony Featherstone.
While he does not go into forecasting exact prices sometimes it is useful to look at the past ?
One of the main gains for me here is the reminder NRW fell “too far too fast”.
Also the question ;
Are we still in the process of being “a turnaround stock?”
Fundamental analysts argue that patterns in share charts are based on past information and say nothing about future price direction. Chartists counter that price is the best signal and gauge of market psychology. A small group of savvy investors combines fundamental and technical analysis techniques. They search for undervalued companies using fundamental analysis to find what to buy. Then they employ charting techniques, such as momentum trading, to know when to buy. Some of the market’s best-performing investors, such as Cadence Capital, combine these techniques. They take the best bits of different investment styles to deliver good returns.
I find momentum trading techniques are particularly useful with potential turnaround stocks. It’s one thing identifying a beaten-up company that is undervalued after heavy price falls; and another picking the right time to buy. Fallen stocks can stay on their knees for much longer than investors realise when there is no obvious catalyst to re-rate the price. Telling oneself that price will eventually reflect company value sounds good in theory, until it takes years to do so. I use momentum trading techniques to spot companies that have fallen a long way from their high and have spent months or years building a share-price base, or consolidating. The trick is buying them as they break higher from that consolidation phase. Breaking through years of price resistance is no guarantee of future gains. Plenty of turnaround stocks are value traps rather than good value. The price breakout sucks fresh capital into the company and more money is lost as investors buy too early. But by using fundamental analysis, the investor has a view of the company’s intrinsic or true value and can compare it to price, to determine if there is a sufficient safety of margin. Buying as the stock starts a new price uptrend is about finessing the timing.
The mining contractor, NRW Holdings, is an example. It was among the most popular mining service stocks when the resources investment boom peaked in 2012. Then, like most of its peers, it tumbled as big miners slashed exploration and maintenance spending. NRW’s 10-year share price chart shows the damage: it crashed from $4.24 in April 2012 to 5 cents in February 2016, after a string of terrible profit downgrades crunched its sector.
The chart below shows NRW building a share-price base of sorts from late 2014 to early 2016 when volume in the stock lifted. The smart money, including a few fund managers I know, believed NRW had fallen too far, too fast. Chart 1: NRW Holdings over 10 years Source: The Bull Like most mining service companies, NRW has plenty of tough challenges. National Australia Bank research this year argued that the mining investment bust was only half over. Mining services demand remains weak and profit margins are under immense pressure. In its half-year results for 2015-16, NRW announced net profit of $6.1 million, from a $120.6 million loss in the same period for last year. Net debt fell $27.1 million to $80.5 million, cash increased to $38.5 million, the order book increased by $85 million and overhead costs were cut by more than 40 per cent. NRW said its business “had stabilised. Since then, commodity prices have improved, resource stocks are rallying and conditions, particularly in gold, are improving. NRW has announced a few good contract wins and it looks likely that the worst is over, although risks remain high. Improving sentiment towards NRW is reflected in its one-year chart below. Note the price breakout from about 5 cents before the interim results to 20 cents, then a new price breakout this month as the stock attracted fresh buying in a rising market. Chart 2: NRW Holdings over one year Source: The Bull
On a longer-term view, a price breakout above 50 cents would create more confidence that a more sustainable uptrend in NRW is forming. As it stands, the undervalued NRW is starting to trend higher as investors bet on improved conditions in the mining services sector and a continued stabilisation in NRW amid savage operating conditions.”
“Tony Featherstone is a former managing editor of BRW and Shares magazines. The information in this article should not be considered personal advice. The article has been prepared without taking into account your objectives, financial situation or particular needs. Before acting on the information in this article you should consider the appropriateness of the information, with regard to your objectives, financial situation and needs. Do further research of your own or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at July 20, 2016. “
Here’s another retrospective analysis/recommendation to consider by Everblu Capital from October of 2017 (price then $1.19)
This analysis DOES predict earnings through to 2020...
Also a one year target price of $1.33.
In fact October 2018 saw the market valuing NWH at $1.97. http://www.everblucapital.com/wp-content/uploads/2017/11/EverBlu-Capital-NWH_20171020.pdf
In fact that year NRW’s performance was more than 42% better then the analyst’s predictions
(20min delay)
