Why Has ComfortDelGro Corporation Ltd’s Stock Price Fallen By 20% In The Last 6 Months?

ComfortDelGro Corporation Ltd (SGX: C52) is a land-transport company with operations in seven countries (Singapore, China, the United Kingdom, Ireland, Australia, Vietnam, and Malaysia). It is one of the largest land-transport companies in the world with its fleet size of around 44,000 buses, taxis, and rental vehicles.

Over the last six months, ComfortDelGro’s stock price has declined by 20%. What may have caused this?

Reasons for a decline

There can be many reasons behind a stock’s price decline. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.

The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profits.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with ComfortDelGro

In ComfortDelGro’s case, I believe it’s both forces at work.

The table below shows some important items from the company’s income statement for the second quarters of 2017 and 2016:

Source: ComfortDelGro 2017 second quarter earnings announcement

We can see that ComfortDelGro’s performance in the second quarter of 2017 was not good. Revenue declined by 3.4%, while profit attributable to shareholders fell by 6.8%.

Meanwhile, the company’s outlook given in its earnings release was also rather bleak. Revenue declines are expected in many of its business lines, as the chart below shows:

Source: ComfortDelGro 2017 second quarter earnings presentation

The weak guidance may have further affected investors’ sentiment. Another factor that could be weighing on investors’ sentiment is the challenges to ComfortDelGro’s taxi business brought on by ride-hailing apps such as Uber and Grab.

Going forward, it will be useful for investors to monitor ComfortDelGro’s progress in returning its bottom-line to growth. If the company can do so, it could have a huge impact on the share price.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.