Capita share price sits at a 26-year low: Is it a bargain?

Capita (LON: CPI) share price has been a big disappointment in the past few years. After soaring to a high of 734p in 2015, the stock has plunged by more than 96% to the current 20 pence. This price is close to its lowest level since 1997.

Capita challenges remain

Capita stock price has been one of the top underperformers in the UK, bringing the company’s market cap to just 345 million pounds. At its peak, Capita was a multi-billion firm.

Capita has been going through headwinds in the past few months. In March, it went through a major hack that affected companies like USS, Marks and Spencer, and Unilever. It is, therefore, facing significant legal headwinds.

At the same time, there are concerns about the company’s management. Jon Lewis, the company’s CEO, will be replaced by Adolfo Hernandez. Analysts are worried about Hernandez’ experience since he currently serves as the VP of Amazon Web Services. In a recent note, analysts at Shore Capital said:

“Our concern was that while the company was restructuring . . . strategically its position was weakening all the time — its competitors were not standing still whilst it was sorting out its problems.”

The most recent results showed that Capita’s revenue rose by 6% to over £1.4 billion in the first half of the year. Its adjusted profit before tax rose to £33.1 million while its reported loss before tax came in at over £67 million. EBITDA dropped by 26% YoY. This happened as the company’s total contract value rose to £1.35 billion.

The biggest challenge for Capita is that its turnaround is taking longer than expected even as it is battling multiple legal claims. While Capita is outright a cheap company, it has some risks ahead.

Capita share price forecast

The daily chart shows that the Capita stock price has been in a strong bearish trend in the past few years. It has dropped below the important support at 22.25p, the lowest level on December 7th.

Capita stock price has remained below all moving averages, pointing to more sell-off. The shares retested the important support level at 19.86p, the lowest level in March last year. Also, the MACD has dropped below the neutral point while the Relative Strength Index (RSI) has moved to the oversold level.

Therefore, the outlook for the shares will be bearish as sellers target the key resistance point at 15p. In the long term, however, there is a likelihood that the shares will bounce back as it moves past this crisis.