Why has the Sigma (ASX:SIG) share price dived 14% so far in December?

What's happened to Sigma shares?

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The Sigma Healthcare Ltd (ASX: SIG) share price has had a disappointing month, falling by more than 14% so far. This comes after the pharmacy chain operator and distributor provided investors with a trading update earlier in December.

At the time of writing, Sigma shares are going nowhere, trading flat at 43 cents a pop.

a man in business attire plunges into a room filled with water with bubbles streaming along his body as though he has completed a high dive.

Image source: Getty Images

What's driving Sigma shares lower?

Over the last few weeks, investors have sold off Sigma shares following the company's admission of a difficult trading year.

On 6 December, Sigma released a trading update to the ASX advising a downgraded earnings guidance for FY22.

The company noted that earnings before interest, tax, depreciation and amortisation (EBITDA) will be 10% lower compared to FY21. In contrast, Sigma previously stated in September that EBIDTA is forecasted for a 5% growth.

The company acknowledged that it has been impacted by shorter-term operational issues as well as COVID-19. The former relates to the roll-out of its Enterprise Resource Planning (ERP), with Sigma switching to the live SAP environment.

The combination of these factors resulted in an unexpected increase in operating costs through the transition. One-off and non-operating costs are expected to come around at $25 million to $30 million.

Investors drew ire of the trading update, sending the Sigma share price 7.62% lower on the day. However, the selling didn't stop there, with its shares continuing to slide another 10% over the next two days.

The Sigma share price has been yet to recover from the heavy selling, hitting a record low of 42.5 cents yesterday.

While still months away, investors may want to pencil in the company's FY22 results on 29 March 2022.

About the Sigma share price

Over the last 12 months, Sigma shares have traversed mostly sideways with a few hiccups along the way. Its shares are down 30% over the period, including year-to-date.

Based on today's price, Sigma presides a market capitalisation of roughly $460.79 million, with over 1.06 billion shares outstanding.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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