The Eclipx Group Ltd (ASX: ECX) share price surged 16% higher yesterday to recover some of its heavy losses recorded in the last 2 weeks.
What drove the share price higher yesterday?
With no company-specific news released to the ASX yesterday, I think the latest surge could be a market correction after the last fortnight's declines and optimism regarding Eclipx's upcoming half-year results release.
On 25 March, Eclipx provided a second update on its financial position and overall wellbeing, including its compliance with debt covenants and terms with lenders.
On the dividend front, the company's Board of Directors confirmed it will not be paying an interim dividend following the release of its 31 March 2019 results.
Why is the Eclipx share price down 68.8% in 2019?
The vehicle fleet leasing company reported a net profit after tax and amortisation (NPATA) had fallen 42.4% compared to the first 5 months of FY18 and that it could not provide full-year guidance for FY19 at the moment.
The company also announced that its financial performance had "softened" since its 29 January 2019 update as Grays Industrial and Insolvency segments continue to underperform and that it is looking at divesting non-core assets.
Both Eclipx management and McMillan Shakespeare Ltd (ASX: MMS) announced that a planned merger was "unlikely" as McMillan pointed to several key issues in Eclipx's trading update including the NPATA decline and ongoing underperformance.
Is Eclipx a Buy?
Given how the company's share price has fallen in the first quarter, I think there's still too much heat in the market surrounding Eclipx.
When it comes to these sorts of situations, I take the view that there are traders and analysts who know a lot more about what's going on with Eclipx and therefore it's best not to try and jump in as a retail investor.
For the moment I'd be steering clear of Eclipx given the ongoing turbulence and checking out this top-rated stock in a $22 billion (and growing) industry instead.
