Sigma At Support

Despite a stronger performance, investors appear disappointed with Sigma's H1 results - bringing the stock to a key chart point.

By Michael McCarthy · 12 Sep 2014

By Michael McCarthy ·
12 Sep 2014

Comments

The large red candle on the chart below tells a pretty clear story. Yesterday’s profit result was a bit of a miss as far as the market was concerned.

If Sigma is not a familiar name, Amcal probably is. Sigma is a wholesale pharmaceutical provider whose brands include Amcal. Its sales growth has been a bit run down recently. They could probably do with a bit of a tonic. Cuts to the government’s Pharmaceutical Benefits Scheme have been a headwind and total sales growth was 2.6% for the year

However, Sigma has a strong balance sheet. It’s had an ongoing buyback program and this will continue. It will buy back shares instead of paying a dividend this half. Further capital management is a possibility if Sigma can’t find businesses to buy with its spare cash. This potential for buy back support might put the trend line which currently intersects at around 76c on the radar for potential buyers of this stock.

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Frequently Asked Questions about this Article…

What is Sigma and what brands does it include?

Sigma is a wholesale pharmaceutical provider, and one of its well-known brands is Amcal. It plays a significant role in the pharmaceutical distribution sector.

Why did Sigma's recent profit result disappoint the market?

Sigma's recent profit result was considered a miss by the market due to slower sales growth, which has been impacted by cuts to the government's Pharmaceutical Benefits Scheme.

How has Sigma's sales growth been performing recently?

Sigma's sales growth has been somewhat sluggish, with a total sales growth of 2.6% for the year, partly due to external factors like government policy changes.

What financial strategies is Sigma currently employing?

Sigma is focusing on a share buyback program instead of paying dividends this half. This strategy is part of its capital management efforts, especially since it has a strong balance sheet.

What might attract potential buyers to Sigma's stock?

Potential buyers might be interested in Sigma's stock due to the ongoing buyback program, which could provide support at the trend line intersecting around 76 cents.

How does Sigma plan to use its spare cash if not for dividends?

Sigma plans to use its spare cash for share buybacks and is considering further capital management options if it cannot find suitable businesses to acquire.

What challenges has Sigma faced in recent times?

Sigma has faced challenges such as reduced sales growth due to cuts in the Pharmaceutical Benefits Scheme, which have acted as a headwind for the company.

Is Sigma's financial position strong despite recent challenges?

Yes, Sigma maintains a strong balance sheet, which allows it to continue its buyback program and explore other capital management strategies.