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Twice a year bargain-hunting retail investors are presented with the ten most beaten down stocks on the ASX. At the end of the Fiscal Year in June and again at the end of the Calendar Year in December the top and bottom ten performing stocks are highlighted on numerous financial websites.

Growth investors pour over the Top Ten Lists in the hopes of finding stocks whose share prices will continue to rise.  Value investors and bargain hunters scour the Bottom Ten Lists for potential turnaround stories.  In the past two years investors savvy enough to have bought shares of general contractor Transfield Services (TSE) and gold miner Evolution Mining (EVN) were rewarded.  Both these stocks vaulted from the Bottom Ten to the Top Ten in about a year.  Here is a price movement chart comparing the two companies.

Let’s look at the latest Bottom Ten List for Fiscal 2015 to see if we can spot any turnaround candidates.  In addition to the FY 2015 loss we’ll take a look at the year over year performance which should tell us which stocks, if any, have begun reversing fortunes. Five of the stocks (*) have the dubious distinction of appearing on the Bottom Ten List for the Calendar Year 2015 while one (**) made that list and last year’s Fiscal 2014 Bottom Ten.   Here is the table.

Company
(CODE)
Sector
(Industry)
Closing Share Price
6 August, 2015
FY 2015
% Change
Year over Year
% Change
Arrium*
(ARI)
Materials
(Steel & Mining)
$0.13 -80.5% -80.06%
MMA Offshore**
 (MRM)
Transportation
(Shipping)
$0.56 -74% -72.52%
Bradken
(BKN)
Industrial Goods
(Machinery)
$1.0750 -62.6% -75.46%
Senex Energy*
(SXY)
Energy
(Oil & Gas)
$0.20 -59.7% -68.5%
Metcash
(MTS)
Retailing
(Food & Staples)
$1.18 -58.5% -58.74%
Fortescue Metals*
(FMG)
Materials
(Metals & Minerals)
$1.91 -56.3% -58.11%
Cardno
(CDD)
Industrial Goods
(General Contractors)
$2.82 -48.9% -52.28%
Kathmandu
(KMD)
Retailing
(Apparel)
$1.65 -47% -44.24%
Santos
(STO)
Energy
(Oil & Gas)
$6.90 -45% -50.71%
Bluescope Steel
(BSL)
Materials
(Steel)
$3.61 -44.6% -39.83%

 

None of these stocks has caught fire in the last six weeks.  BlueScope Steel (BSL) has risen about five per cent while Kathmandu (KMD) and MMA Offshore (MRM) are up slightly.  Bradken (BKN), Senex Energy (SXY), Fortescue Metals (FMG) Cardno (CDD) and Santos (STO) have continued to fall while Arrium (ARI) and Metcash (MTS) have remained essentially flat.

With the exception of the two retailing stocks, the list is populated by companies suffering from the meltdown in commodity prices and the subsequent cost cutting measures from producing companies.  Barring a surprising resurgence in commodity pricing and capital expenditures, the key to any kind of turnaround rests in the individual company’s ability to generate earnings. 

The next table looks at some valuation and forward looking growth estimates.

Company
(CODE)
P/E
(Trailing Twelve Month)
Forward P/E 2 Year
Earnings Growth Forecast
Arrium*
(ARI)
13
MMA Offshore**
 (MRM)
2.86 5.55 -26.6%
Bradken
(BKN)
4.89 -14%
Senex Energy*
(SXY)
+0.3%
Metcash
(MTS)
-13%
Fortescue Metals*
(FMG)
4.41 191 -70.5%
Cardno
(CDD)
5.57 9.1 -26.7%
Kathmandu
(KMD)
17.32 10.97 -18.4%
Santos
(STO)
11.13 +0.7%
BlueScope Steel
(BSL)
300.83 20.06 +45.3%

The absence of earnings or negative earnings accounts for the absence of Price to Earnings (P/E) ratios for some of these stocks.  Note that BlueScope Steel is the only stock in the table with a substantial two year earnings growth forecast while Senex Energy and Santos are around the break-even point.  

Given the dismal performance and prospects of the majority of the stocks in the table one would assume the analyst community would be urging investors to head for the exits. Yet not a single company merits a consensus Sell or even an Underperform Recommendation. Here is a summary table of analyst ratings, last updated at Reuters Finance on 5 August.

Company
(CODE)
Consensus Buy Outperform Hold Underperform Sell
Arrium*
(ARI)
Hold 1 0

8

2

0

MMA Offshore**
(MRM)
Outperform 3 1

4

0

0

Bradken
(BKN)
Hold 0 0

5

1

0

Senex Energy*
(SXY)
Outperform 1 3

5

0

0

Metcash
(MTS)
Hold 2 1

2

3

1

Fortescue Metals*
(FMG)
Hold 1 3

8

5

4

Cardno
(CDD)
Hold 0 2

5

0

 

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