Does Carillion plc have investment appeal after 70% decline in 1 week?

Is Carillion plc (LON:CLLN) (CLLN.L) now an attractive investment after a tough week?

Carillion plc
Carillion plc

The last week has been very challenging for investors in Carillion plc (LON:CLLN) (CLLN.L), with the company falling in value by over 70%.

This was prompted by a release on Monday which included details of a profit warning, the resignation of the company’s CEO and a suspension of dividends for the 2017 financial year.

As well as this, the company announced it was conducting a review, while its debt level is also higher than it had anticipated.

With all of these negative catalysts, it is little wonder in my eyes that the company’s share price has fallen. However, I must admit I have been surprised at the scale of the fall in such a short period of time.

In my opinion, further falls could be ahead for the company’s valuation. I think investor sentiment towards Carillion is negative at the moment, and it would not surprise me if the trend continued in the short run.

I’m also uncertain about the company’s future due to the instability it faces regarding a review, the payment of future dividends and a new CEO. While I think the company could overcome all of the challenges it faces, I think the uncertainty at the moment may negatively affect the way investors view the stock.

Although I think Carillion could make a comeback in time, I feel this could be a long term view. Still, according to its update it is making progress with cost cuts and its order book remains relatively strong.

However, in my opinion, I’d rather wait for further news before adding it to my portfolio. I feel the company’s share price is too volatile just now and investors could react strongly to further news flow. Therefore, while it’s a stock for my watchlist, I won’t be buying it at this moment in time.

About Robert Stephens 3395 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page