Colorpak gets yellow carded

We have downgraded our recommendation on packaging company Colorpak (CKL) even as the stock made a comeback this afternoon.

We have downgraded our recommendation on packaging company Colorpak (CKL) even as the stock made a comeback this afternoon.

Colorpak jumped 8.8% to 80 cents after crashing 11.8% on Monday when management posted a surprisingly weak half year result.

Management is promising a turnaround in 2014-15 after posting a 44% decline in half-year net profit to $2.7 million due to higher-than-expected restructuring costs and weaker customer demand.

While the stock doesn’t look expensive as it is trading on a 2014-15 price-earnings multiple of around eight times and a yield of close to 7% once franking credits are included, I suspect the stock will be range trading over the next few months until there is greater evidence of an earnings recovery.

You can read a more detailed report on the downgrade in today’s earnings season article. Colorpak is part of the Uncapped 100.