Anyone quite follow why such good vibrations at Good Energy (LON:GOOD)? It seems to be going unduly Gangbusters which I am naturally happy with (I hold) but I can't say I fully understand why it has got the afterburners on.....?
A grizzled veteran of the NHS
The key is the word 'Trader'. Something perhaps that all PI's should be doing at this time.
Why ? If a PI has an investment strategy which works for him/her, - as I suspect most here do - why on earth should anyone change it because someone calls himself a Trader? Do you think that perhaps all PIs (sic) should be going Naked as well?!!!
It concerned me that Good Energy (LON:GOOD) has a high Quality score (93) but a high Earnings Manipulation risk. Its Beneish M-score is currently -1.65 and anything less negative than -1.78 is deemed dodgy.
As I didn't understand the M-score, I’ve had a look at the original paper by Beneish, ‘The Detection of Earnings Manipulation’. It’s been a right old learning curve, but here are the the implications for GOOD as I see them – with lots of copy-and-paste from the original paper.
Beneish M-score is designed to capture both possible manipulation of financial statements and situations where a company might be tempted to do so in the future.
GOOD scores Green (good) on 4 measures, and Red (bad) on 4 measures.
First, the good news.
Days' sales in receivables index (DSRI): Green implies a lower likelihood that GOOD has overstated its revenues and earnings.
The asset quality index (AQI): Green implies that GOOD does not have an increased propensity to capitalize, and thus defer, costs.
Sales, general, and administrative expenses index (SGAI): Green implies that GOOD’s expenses have gone up in proportion to sales.
Leverage index (LVGI): Green implies that GOOD does not have the changes associated with the stock market effect of technical default (in how debt-to-assets looks compared to the year before).
And now the bad.
Gross margin index (GMI): Red implies that gross margins have deteriorated, a negative signal about a company's prospects (if you assume that companies with poorer prospects are more likely to engage in earnings manipulation).
Sales growth index (SGI): Growth does not imply manipulation, but growth companies are viewed by professionals as more likely than other companies to commit financial statement fraud, because their financial positions and capital needs put pressure on managers to achieve earnings targets. In addition, concerns about controls and reporting tend to lag operations in periods of high growth. If growth companies face large stock price losses at the first indication of a slowdown, they may have greater incentives than nongrowth companies to manipulate earnings.
Depreciation index (DEPI): Red indicates that the rate at which assets are being depreciated has slowed—raising the possibility that the company has revised upward the estimates of assets' useful lives or adopted a new method that is income increasing.
Total accruals to total assets (TATI): this is used to assess the extent to which managers make discretionary accounting choices to alter earnings.
So my reading is that the first two Red ones (GMI, SGI) are something to keep an eye on in case the company goes rogue to sustain the appearance of success. The second two red ones (DEPI, TATI) have looked at the actual accounts, and I don’t have the knowledge or experience to tell if GOOD have changed their accounting practices.
All of which makes me think I will continue to hold for now, but continue to keep a close eye on share price and news, moving my price alert upwards and top-slicing as I see fit.
I throw this open to the wise collective for comment and instruction.
I'm willing to make a bet that any large cap offshore oil/gas driller (e.g. Transocean (NYQ:RIG) ) massively outperform Good Energy (LON:GOOD) over the next 10 years.
...because the world runs on fossil fuels and will continue to run on fossil fuels for the foreseeable future. ̶R̶e̶n̶e̶w̶a̶b̶l̶e̶s̶ Rebuildables aren't going to cut the mustard any time soon I'm afraid.
COP28 President: There Is "No Science" Behind Calls For Fossil-Fuel Phase-Out
Renewables are too inconsistent without huge battery storage. My energy company paid me twice last week to reduce my electric consumption between 17-18.30, also they are paying me to use more on a Sunday. If it is not windy and sunny, then renewables produce little electric. Replacing fossil fuels with renewables which Starmer keeps on about will cause lots of problems.
If a energy supplier is 100% renewables, where does it get it's energy from on still cloudy days?
Rusty2:
Correct and here are some key reasons as to why:
'Greenies' Are All About The Green
Rumors of the demise of fossil fuels are greatly exaggerated. Invest accordingly.
I dont think this captures how the business has transformed itself over the past 18 months. Its critical financial numbers are viewed in the context of the business to be of any use beyond a cursory glance.
Good Energy (LON:GOOD) sold its solar power generating assets and is using the proceeds to invest in providing retail customers with a comprehensive green energy service where customers take control of both their generation and use of energy ie they can buy green energy when it is cheap and sell it back to the grid when they have surplus. It is also investing in solar and heat pump installation which a) works when its cloudy and b) is going great guns. Finally it is investing in fast growing Zapmap, an leading app that locates chargers including those available (as opposed to being in use), those not working, and how much they cost. Very helpful if you're travelling distance with an electric car.
The sale of the solar assets resulted in the large cash balance and reduction in depreciation charges. As with all power suppliers revenue growth has fallen this year with energy prices. Market price volatility is also reflected in margin changes.
I recommend watching the investor meet presentation to obtain a more informed view.
Even if the fossil fuel market massively outperforms the green energy market it does not necessarily follow that Transocean (NYQ:RIG) will massively outperform Good Energy (LON:GOOD).
Cuddlesticks:
We currently have deficits in terms of oil supply. Companies such as Transocean (NYQ:RIG) have a moat around them. Why? Because nobody wants to come into this sector and spend over $1.3 billion on a new off shore rig and then spend an additional few hundred million on OSVs to service it.
So there is an inability to bring on additional supply into a market that is already constrained on the supply. Essentially Transocean (NYQ:RIG) has a monopoly hence why I predict it goes up >>10 fold over the next decade.
25% fall in two days on no news....can that really be as a result of the Small Cap Share Watch review??
Yes. Once the price starts falling holders pile out. Just like they pile in on buy tips.
Stop losses get triggered as well.
This is beginning to look interesting, I missed it before.
Will see tomorrow.
Dave, my honest answer is that I don’t know, but the market for this stock is very tight. Whenever I have bought, I haven’t been able to deal directly on line straight away, and have had to go through the ‘dealing room’. I haven’t looked at volumes but it would only take a relatively number of relatively small holders taking profits/panicking for market makers to have a field day and produce drops like this.
I had no problem buying and adding to and then top slicing Good Energy (LON:GOOD) at 415p online via ii. . It IS volatile but if the Investec figures for eps doubling each year to 2026 are even half correct AND if the very convincing buy case in SCSW is also on the mark then buying the dip to £3 or so, could well be very profitable.
Probably a size, thing, Ken. My guess is that people haven’t been able to sell even NMS at anything like quoted prices this week.
Timoteo.
I’ve just had a look at the Good Energy (LON:GOOD) trades today and there are a lot, both buys and sells, inside the spread. The spread has been all over the place today though and sometimes very wide, but not much of a problem if trades are well inside it, nor if looking to hold as I am as a long term lockaway. Spread has also been tight at 338-340p. Key thing is the volatility. It’s paid off so far topping up on the dips and I top sliced the too fast spike to 420p.
It’s very likely that the SCSW take some profits lead to the big fall on Monday. Current price looks fair value for now imo. After top slicing I’ll continue to hold unless there’s a disappointing update, as IF profits really are going to double year on year, then in time the current 340p or so might look to have been a steal.
I agree. Famous last words I know, but, especially given today’s announcement, I’ve seen nothing to make me question the fundamentals on which I bought my first or most recent tranche so unless and until I do, this will continue to be a core hold for me !
