Its been a hugely disappointing year for investors in ARM (LSE: ARM) (NASDAQ: ARMH.US) and Blinkx (LSE: BLNX), with shares in the two companies falling by 23% and 85% respectively. Indeed, market sentiment seems to have been in constant decline throughout 2014, with little sign that it could be about to improve significantly.
However, while ARM could be about to turn things around, share price falls could continue for investors Blinkx. Heres why.
When it comes to growth potential, ARM has it by the bucket load. Certainly, the UKs leading technology company may not be growing its bottom line at the same pace as it was a few years ago, but it remains highly impressive nonetheless.
For example, in the next two years, ARM is forecast to increase its bottom line by 12% and by 23% respectively. Both of these growth rates are hugely impressive and show that ARM remains a super-strong growth play.
This contrasts sharply with Blinkx, which recently released a highly disappointing update that showed growth continues to elude it; a situation thatlooks set to remain in place over the medium term. Indeed, even with the recent announcement of an expanded enterprise agreement with Integral Ad Services, Blinkx is forecast to see its bottom line fall by a whopping 59% in the current year.
Stage Of Development
If met, this will put Blinkxs bottom line at the same level as it was all the way back in 2011. Since then, Blinkx has remained profitable, but the bottom line remained flat last year and is expected to fall heavily this year, as mentioned.
For a relatively young company, such volatile and slow growth is not attractive and sentiment is unlikely to pick up unless Blinkx can deliver much more consistent and impressive growth numbers moving forward. In other words, Blinkx is no longer a start-up and shareholders want to see consistently strong growth to justify their investment.
On the flip side, ARM continues to post reliable growth numbers. Its phase as a super-fast growing company may be beginning to end, but it remains a highly lucrative tech play with a nimble, explosive business model that should be able to grow earnings at a multiple of the market average over the medium to long term. As a result of this, it seems to be well worth its current price to earnings growth (PEG) ratio of 1.3.
Meanwhile, the future for Blinkx seems uncertain and it would be of little surprise if further investment is required in order to put the company on a more sustainable path to growth. As such, an investment in ARM still seems like the most logical move for Foolish investors, with Blinkxs share price more likely than not to come under more pressure in the short run.
Despite its huge potential, ARM was pipped to the post by another company when The Motley Fool’s analysts decided on their Top Growth Stock Of 2015.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.