Infomedia Limited (ASX: IFM), a global leader in the provision of software for parts ordering and servicing in the automotive industry, experiences its fair share of volatility.
I can recall at least three times in the past six months when the stock price has fallen more than 15% and recovered, in just one day of trading.
This morning looks to be more of the same.
Immediately after the markets open, shares in Infomedia dropped 21% on the back of a revised profit guidance issued last night, around 6pm.
While the content and timing of the release was slightly distasteful, it appears investors could have overacted.
Indeed Infomedia told the market its Superservice Menus contract with long standing customer Jaguar and Land Rover Limited will not be renewed and as a result, 2015 profit guidance has been downgraded to greater than $13.7 million (2013: $12.3 million) from previous expectations of greater than $14.5 million.
Usually 10% annual profit growth is good but the problem for Infomedia is its seemingly lofty valuation. It trades on a price-earnings ratio of 26 and analysts were forecasting 17% growth in earnings over the next year.
However whilst losing a contract is never good news, for investors with a view to the long-term, today's price fall could be an excellent opportunity to buy the stock at a significant discount.
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