When it comes to investing, everything is relative. A company may be enduring a challenging period, or its results may be worse than the market is expecting but, overall, it can still be performing well. Similarly, a company may be beating all expectations but still be making a loss when it comes to its bottom line.
So, while both Monitise (LSE: MONI) and Standard Chartered (LSE: STAN) are undoubtedly enduring very challenging periods, there is still a huge gulf between their performance relative to each other. And, while their share prices have both collapsed in the last year – in Monitise’s case by 90% and in Standard Chartered’s case by 30% — the latter appears to be in a far stronger position than the former.
That’s at least partly because it remains hugely profitable. Certainly, Standard Chartered’s bottom line is forecast to fall by 36% in the current year following a 28% decline last year. However, it is expected to generate a net profit of £2.3bn and, looking ahead to next year, is due to deliver an increase in earnings of 19%. This, alongside a dividend yield of 3.7% and a dividend coverage ratio of over 2, makes Standard Chartered’s woes seem rather overplayed by the market.
Furthermore, Standard Chartered has a new management team which is implementing a refreshed strategy that is placing a greater focus on compliance. This appears to be a prudent step after Standard Chartered’s multiple accusations of wrongdoing and, with the bank’s shares trading on a price to earnings growth (PEG) ratio of just 0.6, there appears to be significant scope for capital gains over the medium to long term. That’s especially the case since Asia continues to represent a superb long term growth story for the banking sector.
The situation with Monitise, however, is rather different. Like Standard Chartered, it has missed expectations until now, with Monitise releasing numerous revenue warnings in the last couple of years. However, unlike Standard Chartered, it has not yet proved itself as a viable business. Certainly, Monitise has an excellent product and a very enticing client list which includes a number of blue-chip banks. However, it has not yet delivered a maiden profit and, with further changes within its management team, it feels as though profitability is becoming increasingly elusive.
The further problem for Monitise is that its technology is very popular right now. This means that, while take-up and demand for mobile payments solutions may continue to grow in the short to medium term, new technology either within the mobile device space or the banking arena may come along and replace the current generation of mobile payment apps. Therefore, the fact that Monitise continues to lose money does not bode well for its long term future, as now is the time to make hay.
Of course, after such a large fall in share price, Monitise now trades on a price to book value (P/B) ratio of just 0.25. However, with the likes of Standard Chartered also being dirt cheap, there seem to be better opportunities available for long-term investors.