Last week was a shocker for shareholders in DuluxGroup Limited (ASX: DLX), Cardno Limited (ASX: CDD) and Bradken Limited (ASX: BKN) with these three stocks falling 10.5%, 18.5% and 12.8% respectively.
In contrast the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) finished the week 1.2% lower.
That's a painful experience for shareholders, however, with these stocks now trading at significantly lower price levels than just a few days ago, it could be worth taking a look to see if any have fallen into value territory…
DuluxGroup's share price sank despite the leading paint manufacturer and building supplies group posting a solid set of half-year results last week. Those results showed a 4% lift in sales, a 9% increase in profits and a 10% increase in the dividend.
Last week's fall needs to be viewed in a wider context. The stock has gained nearly 130% in the past five years and currently trades on an above average market multiple, so despite the double-digit decline, long-term shareholders are still sitting on healthy gains.
Even at Friday's close of $5.86 the market would still appear to be pricing in robust earnings growth thanks to a booming housing construction market. The latest results, while good, perhaps don't justify the premium so it may be best to wait and see if this quality business gets any cheaper.
Cardno's share price has been on a rollercoaster ride with the stock sinking to a fresh decade low after the professional infrastructure and environmental services group announced a further downgrade to its profits, before jumping later in the week on speculation that the company was "in play".
The news that an (as yet unknown) investor has grabbed a 10% stake in Cardno is certainly interesting given the beaten up state of the shares. However for now investors are probably best sitting on the side-lines until more news emerges.
Bradken's shares price fell despite no negative (or positive for that matter) news being announced. Like Cardno, Bradken is also a beaten-up stock with exposure to the struggling mining services sector and subject to takeover speculation. The sell-off in its share price could be the market taking the view that no change of control event will eventuate. If the market has this right, investors will need to focus on underlying value to re-rate Bradken rather than a takeover premium.
