International Business Machines Corp. (IBM), And Three Stocks “Not-to-Buy” After Friday’s Earnings

Stock Trades Higher Despite Product Sales Slowdown

The final post-earning stock to sell from Friday is one that actually traded higher, Align Technology, Inc. (NASDAQ:ALGN). The maker of Invisalign traded higher by 4.55%. At the surface there is absolutely nothing wrong with the company’s earnings. Align Technology, Inc. (NASDAQ:ALGN) beat on both the top and bottom line, although by a slim margin, with revenue growth of 13.70%. However, sales of its Invisalign product have slowed, as demand is not materializing to expectations.

It is possible that the stock’s gains indicate that the market expects this slowdown to be short-term. If that’s the case, then I find it hard to explain that the company issued guidance below expectations. The stock is now trading at 21.50 times next year’s earnings with a price/sales ratio of 4.23, which isn’t cheap. Therefore, I’d sit this one out!

Conclusion

“I have returned my largest gains when buying after earnings. It is the time when investors are most illogical, and by learning how to identify this illogical behavior, you can profit from it.” Taking Charge With Value Investing (McGraw-Hill, 2013)

I have created significant gains from buying after earnings, even my Motley Fool CAPS picks are almost solely after earnings. This period of time is when deep value is presented, however it is also a period of great volatility and value traps. These three stocks highlighted I believe are presenting a trap, although none appear to have excessive downside. With that said, each company has questions, and due to these questions, I would seek value and better opportunity elsewhere.

The article Three Stocks “Not-to-Buy” After Friday’s Earnings originally appeared on Fool.com is written by Brian Nichols.

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