Why DFC Global Shares Got Crushed

Why DFC Global Shares Got Crushed

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 , which provides financial services to unbanked and under-banked consumers, plummeted 27% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has slumped in 2013 on concerns over new lending guidelines in the U.K., and today's Q4 results -- revenue of $269.1 million missed the consensus by 21% -- coupled with a bleak outlook only reinforce those worries. In fact, management was forced to suspend its bottom line guidance for 2014 due to all the regulatory uncertainty surrounding the business, forcing analysts to cut their valuation estimates significantly.

Now what: Management did offer a full-year adjusted EBITDA forecast of $200 million to $240 million. "[I]t is difficult to forecast with precision the impact and timing our loan program modifications will have on our business in the U.K. in the midst of an evolving marketplace," said CFO Randy Underwood. "Furthermore, the recent significant volatility in worldwide gold prices makes it a challenge to reasonably project the expected profit contribution of our purchased gold and pawn lending products in fiscal 2014." So given the strong headwinds facing DFC right now, I wouldn't be so quick to pounce on this pullback.

It's often assumed that small investors are at a great disadvantage relative to hedge fund managers and other institutional investors. But that's not always true. Bound by multibillion-dollar portfolios and strict bylaws that govern what they can and can't invest in, these giants are often prohibited from tapping the market's greatest stocks until it's too late -- that is, after the stocks have already shot into large-cap status. In this free report, our analysts identify one such stock that Warren Buffett himself wishes he could buy but is effectively restricted from doing so because of its size. To discover the identity of this stock instantly (and for free!), simply click here now.

The article Why DFC Global Shares Got Crushed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published