Buy the 200 DMA - Sell the Results Reports
Updated
WTC came to my attention when looking through the ASX biggest losers, it is a SaaS company that seems to be high growth and in a clear uptrend (reminds me a lot of Xero and Salesforce).
It seems this 20% drop in the last week was post 1h 2019 report. Clearly it fell short of expectations but if you take a look the growth is still impressive;
- Revenue up 68%
- Net profit up 48% (before acquisitions I believe)
- EPS up 43%
I feel I am def. biased having been fortunate enough to start buying XRO at $13, but when you have a SaaS company with high growth, super low attrition and increased usage from current user base it's hard not to pay attention.
Like Xero, they are very focused on R&D (33% of total revenue vs 31% for XRO) but enjoy this growth with a much lower sales and marketing spend (11% of total rev vs 45% for XRO).
Current PE ratio of 117 is quite intimidating, but what has really stood out for me is the reaction this company has to results reports.
See the chart for dates of Results Reports and the corresponding price action;
- 21/2/18 ; -37% in just over a month post report
- 22/8/18 ; -35% in just over a month post report
- 20/2/19 ; - 20% in less than a week post report
I know this is a very simplistic and behavioural focused thesis, but it really looks to me that WTC price action is driven higher by massive expectations, and the pressure is released post report despite massive continued growth.
The question is, will this time be different?
I have no position in WTC yet but will be paying close attention to the 200 DMA as a likely entry point.
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DISCLAIMER - I am not a financial adviser and this is not financial advice.
It seems this 20% drop in the last week was post 1h 2019 report. Clearly it fell short of expectations but if you take a look the growth is still impressive;
- Revenue up 68%
- Net profit up 48% (before acquisitions I believe)
- EPS up 43%
I feel I am def. biased having been fortunate enough to start buying XRO at $13, but when you have a SaaS company with high growth, super low attrition and increased usage from current user base it's hard not to pay attention.
Like Xero, they are very focused on R&D (33% of total revenue vs 31% for XRO) but enjoy this growth with a much lower sales and marketing spend (11% of total rev vs 45% for XRO).
Current PE ratio of 117 is quite intimidating, but what has really stood out for me is the reaction this company has to results reports.
See the chart for dates of Results Reports and the corresponding price action;
- 21/2/18 ; -37% in just over a month post report
- 22/8/18 ; -35% in just over a month post report
- 20/2/19 ; - 20% in less than a week post report
I know this is a very simplistic and behavioural focused thesis, but it really looks to me that WTC price action is driven higher by massive expectations, and the pressure is released post report despite massive continued growth.
The question is, will this time be different?
I have no position in WTC yet but will be paying close attention to the 200 DMA as a likely entry point.
-----------
DISCLAIMER - I am not a financial adviser and this is not financial advice.
Note
CORRECTION - date of the annual report (still in correct spot on the chart)- 22/8/18 ; -35% in just over a month post report
should read
- 28/9/18
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