Italtile Ltd. fell the most in almost seven months on a technical signal the shares would drop and amid speculation a 25 percent gain this year was overdone.
The ceramic-tile retailer dropped 6.2 percent, the most since Jan. 24, to 6.10 rand by the close in Johannesburg.
Italtile’s relative-strength index advanced to 85 yesterday, above the 70 level that signals a stock is due to decline. Before today’s decline, the company had climbed 13 percent since issuing a trading statement on Aug. 6 saying profit would be 17 percent to 19 percent higher, pushing shares to the most expensive since November 2007. Earnings per share increased 18 percent to 41.1 cents, the company said in a statement today.
“The multiple is trading around 16 times earnings; it’s fairly high for Italtile,” Anton Solomons, a retail analyst at Thebe Stockbroking Pty Ltd., said by phone from Johannesburg. “The market is seeing a lot of the earnings growth has been captured in the share price.”
Sales in the year through June increased 16 percent to 3.52 billion rand ($429 million). Profit margins narrowed as price increases were kept below inflation, even after higher energy costs and currency volatility, the company said.
The company’s RSI, which measures how rapidly the stock rose or fell, retreated to 58 today.