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Assessing data quality

Assessing data quality

The quality of data, and hence its relevance to intrinsic value, depends on the degree that it can be quantified. This concept may seem simple, but the recent turbulence in the Flight Centre (ASX: FLT) share price demonstrates it may be under-appreciated by the market.

At the 2015 first half result, Flight Centre management maintained guidance but extensively described a challenging Australian market. Sales in the first half were weak, and profit was even weaker as consultants were discounting to stimulate demand.

While the result was considered reasonably disappointing, management observed some ‘green shoots’, citing improved leisure spend in November and December. The degree of spend wasn’t quantified, nor was its impact on profitability, yet the share price subsequently appreciated by 33 per cent.

When Flight Centre updated the market in June, the challenges cited for the downgrade were not too dissimilar from those described at the half year result, and the share price promptly returned to $35.

In this case, the weak, quantifiable numbers proved more reflective of the company’s position than a few nuanced positive remarks. The more an investor can quantify data, the more confidence can be placed in a valuation.

Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery, find out more.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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3 Comments

  1. So it looks like it’s IV is sliding down to meet the lower price or maybe not quite that low? I’m learning that the IV can drop to meet the price as well as the price rise to meet the forecast IV with lots of “reweighing” in between. Hmmm

  2. And then you have the accounting compliance issues with Slater and Gordon. In this case though, the published accounts can’t really be trusted.

    This doesn’t happen very often with companies, but can certainly throw a spanner in the works.

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