theinvestor22 wrote: I've noticed that some folks here are looking for 2016 guidance confirmation and 2017 guidance issuance. Personally, I'm not looking for either and I would like Nobilis to discontinue the practice of giving guidance altogether.
Here are my reasons...
1. Giving great guidance doesn't mean the share price will go up. NHC is a case in point. They've given agressive guidance for a while now and it might have helped from time to time, but overall isn't doing much. Real results are what they have produced and what we continue to want to see.
2. Instead of analyzing the company's actual growth and prospects, some investors are overly focusing on the guidance numbers themselves. All year long there is constant fussing about whether the company will meet guidance or miss it. Some investors are even looking for regular reassurance. This is not healthy IMHO. These folks should remember Yogi Berra's famous quote about predictions and stop obsessing over estimates. And, the company should stop giving them a reason to.
3. Not giving guidance doesn't mean the share price will go down. Case in point: CRH is often cited on this board for numerous reasons. It doesn't give guidance and its share price is up about 70% this year. MPH, another company that doesn't give out much information about its underlying operations, recent acquisition, just-filed generic, etc. is up about 120% this year.
4. An unimportant miss will disillusion some shareholders and convince them the company is incompetent. These investors don't treat an estimate as just an estimate, but as gospel. Case in point: if NHC meets its latest guidance of $281M revenue and $53M adj EBITDA, then it will have increased those metrics year over year by 22.6% and 25.9% respectively. Let's say they make 20% on both counts. Had they done that without issuing guidance, they would be held in high esteem as a fast growing company, worthy of a superior earnings multiple. With guidance in place, if they make that same 20%, they'll be called losers and some investors will sell their stock in a fit of pique.
5. Guidance can lead to bad decision making. Let's say they could easily meet adj EBITDA guidance if only they a) handn't spent money starting up Concertis and b) saved on an expense line by firing some head office staff evaluating acquisitions. That would make some guidance loving investors ecstatic, but it would limit future growth and adaptability.
6. Some business models are more transparent, which leads to easier estimation. CRH's business model is like that, and they still don't give guidance. NHC's model is less like that because of the various services it delivers and possibility of changing demand/payor mix for each.
7. Lastly, there are a multitude of in-year events that can affect results, thus making guidance useless. Some of these are reasonably foreseeable (although perhaps not quantifiable) and others are serious headwinds/tailwinds that just come along. So, to be on the safe side, if a company were to be overly conservative in estimating results, then guidance would be less useful. And, if a company tries to be more exact, any headwind can make them look incompetent.
I'm pretty sure this won't convince anyone out there. Today or tomorrow, they'll start calling for more guidance numbers again.