The S&P/ASX 200 Index (INDEXASX: XJO) is currently trading near all-time highs after bolting more than 26% in 2019. The strong market has allowed companies to make the most of their growth potential.
Here are 3 ASX companies that failed to blossom in 2019.
Speedcast International Ltd (ASX: SDA)
Speedcast is a leader in remote communication and IT solutions. The company serves more than 2000 customers across 140 countries, operating across four segments: maritime, enterprise and emerging markets government and energy.
Speedcast was touted as an undiscovered growth stock last year. Analysts cited the company as a new age telco leading the way in satellite communication. The company's acquisitions, contract wins, and cash flows supported a strong outlook, however, 2019 saw the Speedcast share price take a dive.
The Speedcast share price opened the year at around $2.90 and is currently trading down more than 68% for the year at around $0.91. The sell-off was the result of Speedcast issuing a downgrade for both its half-year and full-year earnings earlier this year. The company cited several reasons for the downgrade, including; weak market conditions, expected revenue delays and lower expected earnings from its recent Globecomm acquisition.
Reliance Worldwide Corporation Ltd (ASX: RWC)
Reliance Worldwide is the world's largest manufacturer of push to connect (PTC) plumbing fittings and water control valves. The company's flagship product 'SharkBite' has been embraced by plumbers who prefer the PTC technology over soldering traditional brass fittings. Reliance was earmarked to be a boom stock in 2019 with the company expanding its market share in the US.
Despite closing 2018 at all-time highs, the Reliance share price struggled in 2019 and was down more than 28% at one point this year. The company received a surprise downgrade for its US operations in May with analysts citing ongoing trade tensions between the US and China.
Last year Reliance also increased its exposure to the British economy after acquiring John Guest Holdings for $1.2 billion. The acquisition and uncertainty over Brexit and its ramifications on the British economy forced Reliance to increase stock levels of raw materials imported from the European Union.
The price of copper, zinc and stainless steel also hampered the Reliance share price and earnings, resulting in reduced margins from the rising cost of raw materials. In addition, operations in the Asia-Pacific region were stagnant due to the decline in new housing activity in Australia.
Foolish Takeaway
In my opinion, both Speedcast and Reliance are quality businesses with great growth potentials. Although their individual market conditions may be weak, 2020 could either raise further concerns or see a recovery. A more prudent strategy would be to wait for the share price of both companies to consolidate before deciding whether to buy shares in either company.
