Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of DFC Global (NASDAQ: DLLR ) , a company that provides financial services such as pawn loans and check cashing to underbanked consumers, plummeted as much as 28% after reporting its second-quarter financial results.
So what: For the quarter, DFC Global reported net revenue of $262.3 million, a 10.4% decline from the year-ago period, which the company blamed on an ongoing regulatory transition in the United Kingdom, weaker gold prices, and a weaker Canadian dollar, which impacts in currency translation of its most profitable business, also located in Canada. Total profit fell more than 90% to just $0.04 per share from $0.56 in the year-ago quarter. By comparison, Wall Street anticipated EPS of $0.19 for the quarter. Looking ahead, DFC Global dramatically reduced its full-year EBITDA and EPS guidance, and now anticipates reporting a profit of $0.35-$0.80 from prior guidance of $0.65-$1.27.
Now what: Yuck! You would seriously be hard-pressed to find anything that went right for DFC Global during the quarter. It was negatively affected by foreign-currency translation, lower gold prices, industry changes in the U.K., and excluding a one-time settlement would have seen its loan-loss provision for unsecured loans rise as well! The only positives I can wring out of this report are the 28% and 37.7% growth witnessed in Poland and Spain. Beyond that, I have no reason to believe this weakness was a one-quarter occurrence and would suggest sticking to the sidelines.
Instead of trying to catch a falling knife, perhaps you should check out this high-flying top stock instead
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report, "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.