Why the Yowie Group Ltd share price plunged 16% today

This morning the Yowie Group Ltd (ASX:YOW) share price plunged 16%. Here's what you need to know…

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Unfortunately for its shareholders the Yowie Group Ltd (ASX: YOW) share price is once again heading in the wrong direction.

This morning the confectionery company's shares plunged over 16% to a multi-year low of 25 cents.

Although its shares have rebounded slightly to 26 cents, they are still down 13% today and 60% since the start of the year.

What happened?

This morning Yowie provided the market with its latest quarterly update and as you might have guessed from the share price decline, it wasn't great reading.

According to the release, Yowie delivered revenue growth of 23% in the fourth-quarter.

Whilst this is a strong level of growth, it fell well short of the 37% growth guidance given on June 21 when there were only nine days remaining in the quarter.

As a result, full-year revenue grew 51% on FY 2016, compared to guidance of 55% growth.

Ultimately, this means that not only did management downgrade its full-year revenue guidance an incredible three times in 12 months, but it still ended up falling short of it.

Should you buy the dip?

Yowie's shares could arguably be classed as dirt cheap right now, especially with management forecasting revenue growth of between 55% and 70% in FY 2018.

But as shareholders have learned in the last 12 months, Yowie has little credibility when it comes to guidance. For this reason I would suggest investors take what it says with a pinch of salt.

Because of this I plan to avoid the company and instead focus on more reliable consumer staples shares such as a2 Milk Company Ltd (Australia) (ASX: A2M) and Bega Cheese Ltd (ASX: BGA).

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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