Signet Jewelers (SIG – yield 3.7%) fell dramatically upon news surrounding the fourth-quarter earnings release. The fourth-quarter numbers were not the problem. In fact, they exceeded the market’s expectations, and the company increased the dividend by 20%. However, there were many additional announcements (store closures, the sale of credit receivables and more) that led to the ugly number: Signet forecasted 2019 non-GAAP EPS in a range of $3.75-$4.25 when Wall Street had been expecting $6.09. That’s pretty much an earnings disaster, and why the stock fell again today.
As a guiding rule, I do not invest in companies that are forecast to see EPS fall, largely because there’s no logical reason to expect the share price to rise. My recommendation is to sell SIG and reinvest in an undervalued growth stock that’s forecast to achieve strong earnings growth. Why wait several years for a company’s finances to turn around so that your capital can eventually grow, when you can put that same capital into a stock like Apple (AAPL) today? Sell.