The Motley Fool

Why Rocky Mountain Dealerships Got Rocked

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of agriculture and construction equipment dealership network Rocky Mountain Dealerships (TSX:RME) plunged 10% today after its quarterly results disappointed Bay Street.

So what: The stock has been sluggish in recent months on signs of weakening demand, and today’s Q3 results — gross profit sank 28% on a revenue increase of just 4.3% — only reinforce those headwinds. In fact, gross margins decreased 380 basis points over the year-ago period to 11.4%, suggesting that Rocky Mountain’s competitive position is weakening as well.

Now what: Rocky Mountain remains confident it its ability to bounce back. “Our management team enters 2014 with considerable confidence that much of the “tough sledding” over the past year will pay dividends as we continue to focus on the day to day fundamentals that ultimately lead to success,” CEO Matt Campbell reassured investors. “Our agriculture business remains exceptionally strong, and the underlying fundamentals of the market support our optimism for the future.”

More important, with the stock now off about 25% from its 52-week highs and trading at a forward P/E of 7, Rocky Mountain’s downside might be limited enough to bet on that bullishness.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.