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Why G8 Education shares have been smashed in November

Kenneth Hall
Beaten down ASX shares

G8 Education Ltd (ASX: GEM) shares have had a tough month in November.

The childcare group’s share price has plummeted 22.96% lower this month after a weak trading update on 15 November.

What sent G8 Education shares tumbling?

G8 Education shares plummeted 18% to $2.13 per share after forecasting weaker growth for calendar year 2019.

Lower than expected occupancy growth rates and a strong prior period combined to restrict G8’s year-on-year growth.

The company said the improving Child Care Subsidy allowance last year boosted its previous results and it had underestimated overall market supply.

Higher wage costs, a revenue shortfall and a downgrade for this year’s earnings before interest and tax (EBIT) didn’t help. The group is expecting calendar year 2019 EBIT of between $131 million to $134 million following the update.

Needless to say, G8 Education shares didn’t fare well following the news.

The group’s share price plummeted and shares have been trading around the $2 per share mark ever since.

The company was already sliding lower on the ASX prior to the announcement and its market cap is currently at $908 million.

Some ASX dividend investors might see G8 Education’s 6.46% per annum dividend yield and be tempted to buy in. However, it’s important to remember that yield is based on dividend per share divided by share price.

Given G8 Education shares have been slipping significantly lower, rather than the company increasing dividends, it might be best to look elsewhere for ASX yield right now.

Which shares have done well in November?

G8 Education shares rank just below Nufarm Limited (ASX: NUF) in terms of poor November performance.

On the other hand, there are several S&P/ASX 200 (INDEXASX: XJO) stocks that have been booming as the benchmark index surges towards a new record high.

Caltex Australia Ltd (ASX: CTX) and Sigma Healthcare Ltd (ASX: SIG) have both rocketed higher this month and could have some momentum behind them as we head towards Christmas.

The post Why G8 Education shares have been smashed in November appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019