ARBDN Stock Price Forecast: Technical and Fundamental Analysis

• ARBDN stock price is falling after breaking 2 major support levels.
• The company has had weak financials over the last few years. What does the KPI say?
• The stock price is looking to bounce back from its resistance; is trend reversal possible?

ARBDN founded in 2005, is a publicly listed company that engages in asset management and saving services. The firm is led by CEO Stephen Bird.

ARBDN operates in different financial segments like Investments which facilitate investment solutions for institutional and wholesale clients, and the  Adviser segment which provides platform services to wealth managers and advisors. The company also operates a personal segment which refers to personal wealth management.

Fundamental Analysis of ARBDN

Over the last 5 years, the company has experienced a consistent decline in its sales numbers. In contrast, the financial services industry has been growing at a Compound Annual Growth Rate (CAGR) of 7.02%. Unfortunately, the company’s performance over the same period has exhibited a negative growth of 38%, reflecting a substantial decline.

Examining the company’s balance sheet reveals a reduction in its long-term investments, which might have been used to fulfill cash requirements. Although the company did increase its long-term debt, it managed to repay this debt within a year.

Analyzing the company’s cash flow sheets, it’s noteworthy that despite being EBIT (Earnings Before Interest and Taxes) positive in 2022, the net cash generated from operations was negative. This was mainly due to a net negative change in working capital. Moreover, the cash generated from the sale of investments was utilized to settle debts and distribute dividends.

Overall, the company’s financial performance has faced challenges such as declining sales, negative growth, and cash flow dynamics that involve both positive and negative trends.

Key Highlights of the Annual Report of 2022

The revenue of the firm as per the last annual report was GBX 1.53 Billion which represents a year-on-year (YOY) growth of -15.16%.

ARBDN has its operating margin at a negative value as per the last annual report, and it was -0.75%.

The company is burning its cash in operations which have created a loss-making scenario, as it has posted its operating profit as GBX -11 Million. 

With a negative net margin of 18.92%, ARBDN has reported its net profit to be GBX -561 Million, as per the last annual report.

Key performance ratios:

The return on equity is -6.9% 

the current ratio of the firm is 1.02

Debt to equity ratio of the firm is 0.11 

Price to sales ratio of the firm is 2.62

The enterprise value of the firm is GBX 5.05Bn

Revenue breakup as per the last year’s annual report:

Investments: GBX 1.07 Billion

Personal: GBX 201 Million

Advisory: GBX 185 Million

Technical Analysis of ARBDN

Previous price action

Following a disappointing earnings report in August 2022, the stock price of ARBDN underwent a correction from GBX 178 to GBX 131.05. However, this downturn sparked interest among investors due to the attractively low Price-to-Earnings (PE) ratio.

Subsequently, there was a notable surge in the stock price, reaching as high as GBX 214.9. Since then, the stock has been observed to consolidate around these levels. Despite attempts by bulls in both February and July of 2023 to breach this resistance level, the stock was unable to sustain a position above it.

Current price action

Currently, ARBDN stock price has broken past its 2 supports in one go after a gap-down opening. At the time of writing, the stock is trading at the level of GBX 185.7 and is seen between some supports and resistances, while the indicators are also giving some insights for the near future.

Support: The current support for the stock is seen at GBX 181.4 which is very close to its current price, although this range is tested and is filled with liquidity which can cushion the bulls.

The second support is at a lower level of GBX 163.0, which has been tested during the months of July and August in 2022.

Resistance: The first and immediate resistance is seen at the level GBX 198.0 and this is a recently broken support level. The second resistance is 8.53% higher at GBX 210.1 which is at the closing value of the gap-down candle.

MACD: The MACD graph is seen in bearish territory, The signal line crossed MACD and came on top back in the end day of July 2023, and this created a weak momentum in the price which caused a downtrend. At the time of writing, the levels for the MACD and Signal lines are -8.023 and -2.724.

RSI: After the gap-down opening, the RSI graph has seen a heavy fall. The RSI line is at 22.87 which is showing very weak strength of the bulls, while the SMA is well above the RSI line at 43.96. 

EMAs: The 50-day EMA made a bullish crossover with the 200-day EMA in December 2022 following a strong upward movement in October 2022. However, the price experienced a significant decline subsequently, leading to the 50 EMA now falling below the 200 EMA. Presently, the EMA levels are as follows: the 50-day EMA is at GBX 214.8, while the 200-day EMA is at GBX 206.4.

What is the forecast for ARBDN stock?

The ARBDN stock’s outlook, considering both fundamental and technical analysis, highlights its weakened financials and is further supported by the ongoing bearish momentum.

The recent substantial gap down opening has breached two support levels. It’s anticipated that the price might find support from the next level due to the rapid nature of this decline. However, if the bears manage to break the first support and sustain below it, the price could potentially move towards its subsequent support level at GBX 163.0.

Given the current circumstances, it would be prudent to refrain from buying until the ARBDN share price demonstrates a clear trend reversal.

Conclusion

ARBDN, established in 2005, operates within four main divisions: Investments, Adviser, Personal, and Corporate. Unfortunately, the company has faced a period of underperformance over the past five years. Presently, there has been a significant breach of major support levels, notably accompanied by a gap down opening. Given this situation, the technical analysis is pointing towards a potential sell-off in the stock.

Technicals

Support: GBX 181.4, GBX 161.0

Resistance: GBX 198.0, GBX 210.1

RSI: 22

50 EMA: GBX 214.8

200 EMA: GBX 206.4

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.