No Pain, No Gain: Myhome looks sure to ride the Stagecoach route

Has the stock market got its wires crossed over Myhome International? Judging by the way its shares have behaved the franchise group is deep in the doldrums. They have slumped spectacularly from 106p to a mere 15p in less than a year. Yet signals from the group's Esher (Surrey) headquarters indicate the shares could be among the most oversold in the smallcap community.

It is often foolish to bet against the market. So often it seems to get a whiff of disaster – or, indeed, achievement – long before any formal announcement. But it can also hopelessly misjudge a situation.

There are countless examples of shares being pushed to unjustified levels – highs and lows. The madcap dot.com boom that sent many into the stratosphere and the resultant excessive burn-out are classic examples. And what happens across the entire investment spectrum can be repeated on an individual basis.

Remember Stagecoach? I do. After the shares were recruited to the No Pain, No Gain portfolio at 80p, they slumped to a miserable 10p as a succession of doom-and-gloom stories frightened investors. I am not suggesting the bus and train group had not encountered serious problems. It had over expanded in the United States and was experiencing difficulties elsewhere. The fall, however, was a dramatic over-reaction.

With its problems containable, it was not long before recovery was underway. This year the shares hit 294.5p. Share buybacks, producing 81p a share, complicate the gain calculation. Even so, not a bad display for what was once regarded as a busted flush.

Myhome's fall from grace is even more brutal. I realise the decline has occurred at a time when the stock market has fallen out of love with smallcaps. Yet, its slide is much steeper than its compatriots.

True, profits did not hit expectations. Against hopes of £1.9m, the company produced £1.5m. In the previous year it made £734,000. And researcher Equity Development has cut this year's forecasts from £5.9m to £3.6m.

The unfulfilled profit expectations occurred as the group gorged on acquisitions. It started life as a franchised residential cleaning operation, supported by a sophisticated, highly expensive computer system developed by the Unilever foods to soaps behemoth. Russell O'Connell, Myhome's creator, had the bright idea of putting other franchised operations through the Unilever system. So it ventured into such areas as gardening, car valeting, plumbing and window cleaning.

It, perhaps, could be argued that Myhome bit off more than it could chew. Shares were tossed around like confetti. Certainly its last – and biggest – takeover, the £16m acquisition of ChipsAway, carrying out minor car repairs, was largely responsible for ED reducing current year predictions. The deal took longer than anticipated, prompting management to take its eye off the existing businesses in the first quarter. So interim results, due this month, could be rather subdued.

But there is every chance Myhome will reach the reduced year's forecast. Trading is going well, franchisees are being recruited at an encouraging rate, there has, as yet, been no impact from consumer spending cuts, overheads have been reduced and cross-selling the franchise offerings is underway. Chairman Jon Pither even tried – if unsuccessfully – to spread a little cheer at March's yearly meeting.

At 15p the group is valued at less than £10m – some £6m less than what it paid for the successful ChipsAway concern. And the shares, selling at not much more than three times this year's expected earnings, look as cheap as chips. Even if ED's forecast is not met – one researcher has a £2.5m estimate – the shares are still deep in the bargain basement.

Myhome's misfortune is a stark illustration of how brutal the market can be when one of its favourites disappoints. Issuing shares at 85p and 72p last year merely added to the disappointment of City followers.

O'Connell says the share price is a "blooming joke". He accepts responsibility. "I've got to take it on the chin; we were bad at communicating with the City," he said.

My guess is that Myhome will do a Stagecoach. The portfolio first climbed on board at 15.5p, selling at 50p. It returned at 27p. The subsequent performance has been as painful as catching a falling knife. Still, I am bloodied but unbowed. The portfolio is hanging on, hoping – eventually –for another profit.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
PROMOTED VIDEO
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
Sport
Arsenal signing Calum Chambers
sportGunners complete £16m transfer of Southampton youngster
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Java Developer - Banking - London - Up to £560/day

    £500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

    HR Business Analyst, Bristol, £350-400pd

    £350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Account Manager - (Product & Account Management, Marketing)

    £26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

    Day In a Page

    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz
    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on