It's been a couple of months since I first discussed Communisis, the marketing services provider, and two factors have come together to send it back into my radar. Cliffnotes for those who don't want to read the first post as follows;
Decent business, shifting from old-fashioned into modern marketing;
Still predominantly direct mail, though, so at a;
Pivotal point in the business - unsure of which way it's going.
But back to those two factors. One of which, obviously, is the share price graph to the right. Being such a thinly traded stock, individual trading decisions can have a big impact on the price in the short term - which is what I suspect happened when CMS fell off a cliff. Sure, market volatility was high, but a 18% fall in one day on no news isn't particularly normal volatility! In a rare stroke of luck, Communisis (LON:CMS) was on my watchlist already, so I dug around, found nothing worthy of any note, and bought in at 25p - marked in black on the chart.
I should note that the spread on CMS is also usually quite high - back when I first looked, CMS was priced at 32p with an ask of 33.5p. By buying at 25p, then, I grabbed the shares over 25% cheaper than they had been two months ago.
The metrics still look tempting, particularly the forecast earnings, but these haven't hugely shifted since my last post - it is, after all, what originally attracted me to the business. What has changed - and put it on my radar in the first place - is the interim management statement issued 26th July. Props to Communisis for this; the later statement is as detailed as they come, and it served to change my mind even before the share price fall. I was tempted at the 32p immediately preceding the plummet - so for once my slow reactions saved me some cash!
So what in the IMS made me change my mind? A few main factors. Firstly, a general factor - both the IMS and the presentation released a month before it gave good points of clarification on the business which I didn't previously have. Any uncertainty I have on the business is basically priced in by subconsciously increasing my margin of…
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