Results in: Why Netcomm Wireless Ltd (ASX:NTC) shares crashed 40% lower today

The Netcomm Wireless Ltd (ASX:NTC) share price has crashed 40% lower after providing weak guidance for FY 2019…

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The worst performer on the All Ordinaries today has been the Netcomm Wireless Ltd (ASX: NTC) share price by some distance.

At the time of writing the broadband equipment company's shares are down a massive 40% to 82 cents following the release of its full year results.

For the 12 months ended June 30, here's how the company performed in comparison to a year earlier:

  • Group revenue increased 69% to $181.7 million.
  • Earnings before interest, tax, depreciation and amortisation increased 5.7 times to $20.5 million.
  • Net profit after tax came in at $8 million, compared to a loss of $1.8 million.
  • Operating cashflow up to $23.7 million.
  • Strong balance sheet, with no debt and net cash of $27.3 million.
  • Outlook: Revenue is forecast to grow 15% to 20% and underlying EBITDA expected to be flat.

The driver of Netcomm Wireless' strong full year result was its Telecommunication Infrastructure Equipment and Industrial Internet of Things segment thanks to the expansion of key projects. As you can see below, this was complemented by an improved performance by its Consumer Broadband segment. The segment returned to growth as management initiatives to improve the business took effect.

Source: Company presentation

CEO & managing director Ken Sheridan appeared to be pleased with the company's performance. He stated that: "Over the course of FY18 we generated material revenues in our Telecommunication Infrastructure Equipment and IIoT business. We continued to receive and deliver large DPU orders to nbn for its FTTC project and importantly our relationship was further strengthened with the agreement to supply Network Connection Devices [NCDs], providing the in-home link for connectivity."

However, its revenue growth is expected to slow and underlying EBITDA is expected to be flat in FY 2019, which may have sent investors to the exits today. Management has advised that FY 2019 will be a year of consolidation to ensure a sustainable platform is in place to drive the next step change in growth expected for FY 2020.

Revenue is forecast to grow 15% to 20%. This forecast growth is dampened due to a slower than expected rollout of the nbn FTTC project and a slower rollout of the AT&T Fixed Wireless project. However, management was quick to point out that this revenue has not been lost, but rather it is deferred to future periods.

Underlying EBITDA is expected to be at a similar level to FY 2018, with "revenue growth offset by lower margins as the sales mix changes from higher margin Australian DPU sales to lower margin NCD sales and higher near-term component costs are incurred due to global industry wide shortages."

Should you invest?

Based on Netcomm Wireless' earnings per share of 5.5 cents, its shares are now changing hands at 15x earnings. I think this is a reasonable price to pay for its shares given its outlook for a flat FY 2019 before returning to growth in FY 2020.

In light of this, I would class it as a buy alongside IT hardware distributor Dicker Data Ltd (ASX: DDR) and accounting software company Xero Limited (ASX: XRO).

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of Xero. 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 Scott Phillips.

More on Share Fallers

A woman screams and holds her hands up in frustration.
Share Fallers

Why Brainchip, Endeavour, Star, and Telix shares are sinking today

These shares are ending the week deep in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Appen, IDP Education, Objective Corp, and Siteminder shares are tumbling today

These shares are having a tough time on Thursday. Let's find out why.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

Why Appen, Flight Centre, Fortescue, and Platinum shares are sinking today

These shares are having a tough session on hump day. But why?

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Domino's, Johns Lyng, Polynovo, and Praemium shares are dropping today

These shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Block, Guzman Y Gomez, Lovisa, and WiseTech shares are sinking today

These shares are starting the week deep in the red. But why?

Read more »

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Share Fallers

Why Guzman Y Gomez, Jumbo, PWR, and REA Group shares are crashing today

These shares are ending the week deep in the red. What's going on?

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why ANZ, Goodman, Magellan, and Super Retail shares are sinking today

These shares are having a very tough time on Thursday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Cleanaway, NAB, Step One, and Stockland shares are falling today

These shares are having a tough time on hump day. What's going on?

Read more »