A quality company

This currency tailwind was evident in today’s results. Revenue for the first half came in at £240.4m, compared with £198.5m in the same period last year. This 21% increase includes a 9% currency benefit.

Profit before tax jumped 25% to £35.7m, although this increase completely reverses to a 7.4% fall at current exchange rates. The weaker pound also helps explain the fall in profit on increased revenues; the company’s international expansion and wages are now more expensive.

The management team should be lauded for including its full-year revenue and profit expectations in the update, allowing investors to more accurately value the company. The predictions were as follows;

“We continue to anticipate growth in both revenue and profit in this financial year and expect full year revenue to be in the range of £500m to £530m and Profit before tax to be in the range of £85m to £105m.”

Renishaw is, in my mind, a quality company. When precision is mission-critical, manufacturers often turn to Renishaw. Aside from being well respected in its niche, the company has a record of strong returns on capital and, aside from a blip around the financial crisis, has an impressive dividend record too. But I can’t quite justify a purchase at current price.

Even at the top-end of expectations, the company would trade at around 20x profit before tax which seems a little steep given the company’s recent growth rates. Buying a quality business like Renishaw at current prices may not be disastrous, but I’m not sure how likely the company is to outperform the market from this valuation.

Impressive margin

Outdoor touch-screen specialists and small-cap Zytronic (LSE: ZYT) might be of interest to investors following Renishaw. Its products are bespoke and the company often designs accompanying software which could inspire customer loyalty in the long-run.

The company manufactures in England but sells the majority of product abroad. Unfortunately for Zytronic, currency hedging means it wont gain any benefits from the low pound for over a year.

Revenues were flat last year, but the company reported an impressive 20% operating margin and improved cash-flow. This year has started well, with “orders, revenue and current trading ahead of the same period last year.”

This, combined with a PE of 15, indicates the technology company could possibly outperform Renishaw in the future.

The post Is Renishaw plc a buy after today’s results? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zach Coffell has no position in any shares mentioned. The Motley Fool UK has recommended Renishaw. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With this in mind, let’s take a look at two prime candidates.

Go with the flow

FTSE250 constituent, Rotork (LSE: ROR) is a market leading actuator and flow control company. In other words, its products are needed wherever gases or liquids are managed. In addition to its four divisions (Controls, Fluid Systems, Gears and Instruments), the £1.9bn cap also provides “worldwide planned and emergency actuation services including: actuator overhauling, health checks, retrofit, preventative maintenance and extended scope projects”.

After a tricky couple of years, Bath-based Rotork’s shares have enjoyed a resurgence of late, no doubt helped by a recovery of sorts in the oil price. Despite boasting an excellent history of returns on capital and solid operating margins, the company’s shares could be purchased for as little as 155p when oil hovered around the $30 mark back in February. They start today at 221p, underlining the importance of buying quality companies when others are deserting them. But does this mean investors have missed the boat? 

With a forecast price-to-earnings (P/E) ratio of just under 23, Rotork’s shares might not seem cheap but, as mentioned in a previous article, the P/E should only be regarded as a starting point when it comes to scrutinising a company’s investment case. Although net debt has increased in the past couple of years, Rotork’s balance sheet looks strong. Recent levels of free cashflow have also been higher than earnings, suggesting that the company is turning into something of a cash machine for its investors.

Should the oil price recover further, I wouldn’t be surprised to see Rotork’s shares return to and rise above their 2013 peak of just under 300p. Factor-in our impending departure from the EU and the fact that Rotork exports a lot of what it produces and the company looks like a solid pick. While unlikely to attract income-hunters, a well-covered yield of 2.3% is nevertheless welcome, particularly in these low-rate times.

Pump up your portfolio

Engineering peer Spirax-Sarco (LSE:SPX) is actually two businesses. One is the eponymous world leader in the design, manufacture and provision of steam and thermal energy management solutions. The other, the Watson-Marlow Fluid Technology Group, specialises in producing mechanical pumps and associated fluid path technologies.

Like Rotork, Spirax has an excellent history of high returns on capital (consistently above 20%). Operating margins are also superb relative to the market as a whole. The company’s net cash position is yet another positive, particularly for those investors who like to avoid adding heavily indebted companies to their portfolios.  Factor-in Brexit and the performance of the company’s shares in recent months makes perfect sense.  

Spirax’s shares have jumped over 30% since June, making them even more expensive than Rotork’s on a forecast P/E of almost 26.  While sterling’s plight may already be reflected in this price and today’s yield of around 2% isn’t anything to shout about, I can’t see investors abandoning the company in a hurry.

The post Is it utter madness not to snap up these 2 high quality exporters? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended Rotork. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Whether the investment is in railways, highways or power plants, one major beneficiary will be Renew Holdings (LSE: RNWH). Renew owns a variety of subsidiaries that provide engineering and long-term support services for a variety of customers including Network Rail, major utilities and telecoms.

While there are plenty of companies out there that would benefit from major infrastructure investments such as construction firms or materials manufacturers, Renew has several characteristics that make it an attractive long-term investment to me.

First, by making maintenance services contracts a large part of its business, Renew protects its downside by ensuring long-term revenue visibility throughout the business cycle. This is evident in the order book, which increased 9% year-on-year over the past six months to £515m, roughly equal to full-year 2015 revenue.

Second, Renew has a very healthy balance sheet. Net debt at the end of the last reporting period stood at a very low £4.2m and the company expects to have net cash at the end of the year. Having low or no debt to service further protects the company during economic downturns and also gives Renew ammunition for acquisitions.

With revenue growing even without a major government-led investment push, operating margins increasing consistently and a healthy balance sheet, Renew is one cyclical on my watch list come the next eventual economic downturn.

Big is beautiful?

One company that would benefit more directly from any infrastructure-dominated stimulus plan is Irish construction giant CRH (LSE: CRH). While CRH has contracts stretching across the globe roughly half its sales are in Europe with the UK a major market.

CRH provides materials for construction companies ranging from cement and asphalt to fencing and shutters. This is undeniably a highly cyclical business but CRH has a few competitive advantages that most competitors don’t enjoy.

Most important among these is the company’s sheer size. With annual revenue topping €23bn last year, CRH benefits from the operational efficiencies of its massive scale. Combining back office operations and maintaining dominance in a wide range of local markets helped boost operating margins to 4.6% for the past six months.

Geographic diversification also provides some insulation against a downturn in a single market. Of course, the downside to being in more than 20 countries and being so large is that it’s rather difficult to increase sales enough to provide significant organic growth.

That’s why CRH is highly acquisitive. The latest splurge was last year’s $6.5bn purchase of regulator-mandated divestments from Lafarge and Holcim related to their merger. These new assets helped boost revenue by a full 35% year-on-year over the past six months.

There are many other construction materials companies out there, but CRH’s proven ability to make large acquisitions work for shareholders, intense focus on margin improvement, geographic reach and steadily increasing dividends make for a high quality company whatever path Theresa May takes.

The post Theresa May’s infrastructure investment plans could be huge for these stocks appeared first on The Twelfth Magpie.

More reading

• 3 stocks I’m looking to buy in July

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Bargain BAE?

With its full-year results due on 18 February, I think BAE Systems (LSE: BA) could be one of them. The City is predicting a 1% drop in EPS for the year ended in December 2015, and that puts the shares on a forward P/E of 13.8, based on today’s share price of 515p. That’s perhaps not an obvious bargain rating, but with dividend yields of better than 4% on the cards, it does look good to me.

In the firm’s most recent update, we heard that BAE “…expects good sales growth in 2015 and a robust order backlog at the half year of £37.3 billion underpins confidence in the future prospects for the business“.

With a return to EPS growth forecast for 2016, I see BAE as a well-run company whose shares are cheap enough to qualify for the description ‘bargain’ right now.

Top insurer?

RSA Insurance (LSE: RSA) should be bringing us its 2015 results on 25 February, which will bring to and end a dramatic year. How so? Well, we saw the firm’s share price spiking upwards but then it crashed back to earth back to earth when hopes of a takeover by Zurich Insurance Group were first mooted and then finally dashed.

Despite that, I reckon a 12-month share price fall of 8% to 418p makes RSA look like a decent enough bargain, giving us a forward P/E of around 12.5 and with a forecast 2016 dividend yield of 3.4% on the cards.

It’s been a year of reorganisation for RA with its chief executive Stephen Hester telling us at Q3 time that “if we can keep the improvements coming, the future is bright for RSA as a high quality, high performing leader in its markets“. He could well be right.

Oily recovery?

Now how about Tullow Oil (LSE: TLW)? The company’s shares have crashed by a hefty 57% over the past 12 months to drop to 170p. And they’ve fallen by 88% over five years too. Am I mad to suggest it?

Well, we’re due Tullow’s full-year results on 10 February. We don’t know what we’ll get — analysts have been expecting a very small profit to be announced but the recent further slide in oil prices could easily have put paid to that.

Still, with Brent Crude back up from below $30 in the past few days to $35, the Tullow price has ticked up a little too. And there surely will be a bottom some day, when it will be a perfect time to buy. Could we already have reached that point?

The post 3 Hot Picks For February? BAE Systems plc, RSA Insurance Group plc And Tullow Oil plc appeared first on The Twelfth Magpie.

More reading

• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• 1 FTSE stock tipped to handily outdo Rolls-Royce shares by 2027
• Forget SpaceX, here are 3 UK tech stocks to consider buying without the high price tag
• Should investors consider buying BAE Systems shares now they’re back below £20?
• BAE shares are falling: opportunity or warning?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Still, things are recovering cautiously, and with about half a day of January still to go the top index is back up to 5,980 points. And when markets are depressed, that means bargains, right?

Pharma recovery

Look at AstraZeneca (LSE: AZN), whose shares have lost 9% over the past 12 months, to 4,382p. How does the price of oil and Chinese economic woes affect AstraZeneca’s long-term pharmaceuticals business? Not at all!

AstraZeneca has been in the process of focusing on its core businesses and beefing up its drugs development pipeline ever since new boss Pascal Soriot took the helm in October 2012, and we’re not expecting a return to earnings growth until 2017 at the earliest. On 4 February, we should have full-year results, providing the latest news on the firm’s rejuvenation strategy.

Things looked very stable at third-quarter time, and we’ve also seen quite a number of promising milestones in drug development along the way — Q3 R&D costs were up 18%, “reflecting the recent start of key Oncology trials“.

Meanwhile, AstraZeneca is still nicely profitable, on a P/E of 15.5 and offering a likely 4.2% dividend yield.

Takeover boost

We should have full-year results from BG Group (LSE: BG) on 5 February, but they’ll take a back seat to the ongoing takeover from Royal Dutch Shell. Originally revealed back in April 2015 before the oil price slide had really set in, the plan was put to the vote this week and both sets of shareholders have voiced their approval — Shell on Wednesday and BG on Thursday.

BG’s share price fell back from its initial boost as falling oil raised fears that Shell was overpaying and that the merger would be called off or the terms changed, but we’ve seen a 16% recovery to 1,040p, which is largely in line with the Shell offer.

Mergers and acquisitions were always a big possibility after the oil price set asset values tumbling, and in this case I think BG shareholders are enjoying the better deal.

Engineering boost

Rolls-Royce Holdings (LSE: RR) has been through tough times, with its shares losing half their value since last April’s peak, to 540p. The cause was a series of profit warnings due to very tough trading conditions, and the company is firmly in turnaround mode right now.

Full-year results are due on 12 February, after a third-quarter update warned that “Further market headwinds increase uncertainty for 2016“. At the time, outlook for the full year was adjusted to the lower end of previous guidance, though I think that might still turn out to be optimistic.

If results are better than expected, we could see an uptick in the share price, but with EPS already forecast to drop by 43% in 2016 to put the shares on a forward P/E of 18, I wouldn’t be buying now.

The post 3 Hot Picks For February: AstraZeneca plc, BG Group plc, Rolls-Royce Holding PLC? appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Both companies are ignored by many private investors, but I believe they could be profitable buys in today’s market.

Costain

Costain shares rose by about 3% to 377p this morning after the firm said its order book grew by 11% to £3.9bn in 2015 – a new record.

The engineering solutions provider said that full-year results for 2015 were expected to be in line with expectations. That puts Costain shares on a 2015 forecast P/E of 16.

At first sight, this doesn’t seem especially cheap. But since its 2014 refinancing, Costain has maintained a significant net cash balance. The firm said today that net cash was £100m at the end of 2015. Given that Costain’s market capitalisation is only £375m, this cash needs to be taken into account.

Based on Costain’s interim accounts, I reckon around £50m of its cash is probably surplus to requirements. Removing this from the firm’s valuation gives a more attractive P/E of 14.

Costain may seem like a dull company, but the firm’s shares have risen by 77% over the last five years. During this period, total dividends of about 48p have been paid, taking the five-year total return to more than 100%.

I believe that Costain’s focus on larger and more complex infrastructure projects is a plus. It enables the group to add more value than through simple construction work and could also provide protection during the next construction downturn. Customers seem to agree. Costain said today that 90% of its order book is repeat business and that it has secured revenues of more than £2.8bn for 2017 onwards.

HSBC Holdings

HSBC has often looked cheap in the years since the financial crisis, but has been a disappointing investment. The bank’s shares have lost 20% of their value over the last five years as it has failed to meet its own performance targets.

However, the current share price of around 500p has proved to be a key support level in the past. HSBC stock hasn’t fallen below 500p for any length of time since 2009. In my view, HSBC’s fundamentals also support the idea that now could be a good time to buy.

The bank’s shares trade at a 26% discount to their book value and have a 2015 forecast P/E of just 9.5. HSBC is expected to pay a total dividend of $0.51 per share for 2015, giving a prospective yield of 6.8%. In my view this valuation provides a good level of downside protection and suggests that for a long-term income investor, HSBC could be a smart buy.

Although computer problems have generated unwelcome publicity for HSBC in the UK this week, in my experience such issues rarely have a lasting impact on banks’ trading. What’s more important, I believe, is that HSBC’s financial health continues to improve.

The bank reported a common equity tier 1 (CET1) ratio of 11.8% at the end of September 2015. That’s up from 11.1% at the start of 2015 and well above the 10% level seen as risky by City analysts.

The post Why HSBC Holdings plc And Costain Group PLC Could Help You Retire Early appeared first on The Twelfth Magpie.

More reading

• Up 250%! Here’s why I bought HSBC shares over SpaceX stock
• How much might £19,999 in a Stocks & Shares ISA be worth by 2036?
• Could a Stocks and Shares ISA eventually replace the State Pension?
• 2 bank shares I like better than Lloyds today
• How much do I need to invest in HSBC shares to target £5,986 a year in second income?

Roland Head owns shares in HSBC Holdings. The Motley Fool UK has recommended HSBC 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.

If we want to see polarised fortunes, all we need to do is look at Rolls-Royce (LSE: RR) and QinetiQ (LSE: QQ). In a 2015 in which Rolls-Royce saw its shares drop 35% to 592p after a string of five profit warnings in two years, QinetiQ shareholders have enjoyed a 40% rise to 269p.

The QinetiQ share price got a big boost on 19 November when its first-half report told of rising revenue and profits, and signalled a 5.6% rise in the interim dividend – not a massive cash boost, but firmly ahead of inflation. On the day the price rose more than 10%, but I can’t help seeing a little irrational exuberance there. Underlying rises in profits were really very modest and forecasts for the full year suggest only a 1% rise in EPS (followed by a hardly more impressive 3% the next year). So I wonder if it’s a case of investment cash earmarked for the sector simply going into the company that’s doing best?

Too pricey

The thing is, the year’s price rise for QinetiQ has put the shares on a prospective P/E of more than 17, which is a significantly richer valuation than the long-term FTSE 100 average of around 14 – and that’s for a company paying dividend yields of only 2.2% and in a risky sector in a downturn. QinetiQ just seems overpriced to me.

Rolls-Royce on the other hand… Well, it also looks overpriced but for different reasons. In fact, ace investor Neil Woodford recently cut his holdings in Rolls-Royce after a lacklustre November trading update. It contained headlines like: “Further market headwinds increase uncertainty for 2016“. The company told us to expect profit at the lower end of the guidance range and that its outlook suggests “sharply weaker demand in 2016“.

The firm’s new CEO Warren East has launched a streamlining attack on the company’s management structure and is looking to make significant cost savings in the coming year. But the problem is that we’re still facing very gloomy forecasts for 2015 and 2016 – a 20% fall in EPS this year followed by a further 43% drop next year, lifting Rolls’ P/E as high as 19 with only a 2.7% dividend yield expected.

Having said that, Mr East has ceased offering earnings guidance for the next year or so, saying that the outlook is too uncertain. That casts serious uncertainty on even these pessimistic City forecasts.

There’s a better choice

At a low point in a cyclical recovery we should expect to see higher-than-usual P/E multiples, but at this stage I’m far from convinced that Rolls-Royce will have hit the bottom next year. It’s not just the uncertainties of demand, it’s also fuelled by some obscure pricing and accounting practices and by falling margins in the big aero engines business.

I don’t expect shareholders in either of these companies to have a good 2016, and I certainly wouldn’t buy either right now. No, if I had to make a pick in this sector, my money would be on BAE Systems with its forward P/E ratios of under 13 and predicted dividend yields of more than 4%.

The post Can Rolls-Royce Holding PLC’s 2016 Beat QinetiQ Group plc’s 2015? appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The turnaround kid

With Rolls-Royce (LSE: RR) being at the beginning of its own turnaround story, many investors are interested in buying a slice of the engineering company. This seems to be a logical move since Rolls-Royce has an excellent management team, is financially sound and has the potential to benefit from a growing aerospace market in particular.

The problem, though, is that Rolls-Royce appears to be rather expensive at the present time. For example, it trades on a forward price-to-earnings (P/E) ratio of 19.5, which indicates that its shares could continue to come under severe pressure even after their fall of 34% since the turn of the year.

And with the company’s bottom line due to fall by 20% this year and by a further 43% next year, 2017 could see further losses being reported. As such, it may be prudent to wait for either a lower share price or an improved outlook before piling in to Rolls-Royce.

Good times ahead?

Also set to have a difficult year is Royal Mail (LSE: RMG). Its bottom line is forecast to decline by 20% in the year to the end of March 2016 and while its shares have risen by 3% in 2015, they could come under pressure in the coming months as the market prices in the expected disappointment from a net profit decline.

However, Royal Mail also offers excellent upside potential in 2016 and beyond, with the 2017 financial year set to deliver a rise in the company’s earnings of 10%. With Royal Mail trading on a price-to-earnings growth (PEG) ratio of 1.2, this upbeat growth potential does not yet appear to be priced-in, which means that its capital gains could be very impressive by the end of 2016.

In fact, if Royal Mail were to rise by 25% next year, it would still trade on a P/E ratio of 14.8 which, for a company that offers double-digit earnings growth potential, does not appear excessive.

Stability play

Meanwhile, National Grid (LSE: NG) continues to offer one of the most consistent and reliable growth outlooks in the FTSE 100. While its shares trade on a P/E ratio of 15.2 and offer little in the way of strong earnings growth prospects over the next two years, National Grid’s income appeal remains very high.

For example, it currently yields 4.8%, which is around 20% higher than the FTSE 100’s yield. Plus National Grid offers much greater resilience than the wider index during challenging economic circumstances. The index has a relatively large exposure to the resources sector and the financial services sector, both of which could prove to be volatile in 2016. In fact, with a beta of 0.75, National Grid clearly offers a less volatile shareholder experience than the wider index.

If National Grid’s share price were to rise by 25%, it would still yield 3.8% and continue to offer a more robust outlook than the majority of its peers. Therefore, if US interest rate rises hurt investor confidence next year and the Chinese economic slowdown gathers pace, National Grid could become more in demand and its shares could easily be bid up by 25% or more.

The post Will National Grid plc, Rolls-Royce Holding PLC And Royal Mail PLC Rise By 25% In 2016? appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Peter Stephens owns shares of National Grid and Royal Mail. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fair price

Of course, AstraZeneca has continued to engage in its own acquisition programme that has seen its financial outlook transformed in recent years. And while positive earnings growth isn’t yet a reality and isn’t forecast to be so in 2016, over the medium term AstraZeneca is expected to become a company with an upbeat long term outlook thanks to its improved pipeline.

Furthermore, with AstraZeneca’s share price having fallen by 3% since the turn of the year, it now trades on a slightly lower valuation. In fact, it has a price-to-earnings (P/E) ratio of 15.7. For a company with a rapidly improving pipeline, a sound balance sheet, as well as the scope to make further acquisitions, that appears to be a very fair price to pay.

Ready for growth

Also having a disappointing 2015 is engineering company GKN (LSE: GKN). Its shares have fallen by 13% since the turn of the year and this is at least partly due to concerns surrounding future demand for its products from Volkswagen after the emissions scandal. And with a potential slowdown in Chinese demand for cars, investors have been rather uncertain regarding GKN’s long term future. This, plus a forecast 10% fall in earning this year, has caused investor sentiment in the stock to decline.

However, GKN is due to return to positive growth next year and while it does face a number of challenges, the reality is that demand for cars is likely to remain buoyant due to strong long term demand from emerging markets. While the Volkswagen story is definitely a setback, it’s unlikely to make a major impact on global demand for premium vehicles. As such, GKN’s P/E ratio of 11.4 holds considerable appeal.

Pain threshold

A painful 2015 was also endured by investors in Premier Oil (LSE: PMO), with the falling oil price causing a large deterioration in investor sentiment. In fact, Premier Oil’s share price has fallen by 66% since the turn of the year and it’s realistic to assume that things could easily get worse before they get better. That’s because no ceiling on supply was set at the recent Opec meeting, and with US interest rate rises on the horizon the price of oil could continue to fall during 2016.

This, of course, would hurt Premier Oil’s profitability and could lead to further writedowns in the value of its asset base. However, with it now trading on a price-to-book value (P/B) ratio of just 0.35, it appears as though more pain is already priced in. As such, Premier Oil appears to be worth holding onto at the present time.

The post Is It Time To Sell AstraZeneca plc, Premier Oil PLC And GKN plc? appeared first on The Twelfth Magpie.

More reading

• Down 14% to below £135, here’s where AstraZeneca’s deeply undervalued share price ‘should’ be trading today
• The top 3 FTSE shares for beginner investors to consider buying in 2026
• 2 FTSE shares for beginners starting an ISA
• 3 UK shares to consider holding in a Stocks and Shares ISA for a decade

Peter Stephens owns shares of AstraZeneca. The Motley Fool UK owns shares of GKN. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The company develops variable transmission systems for vehicles, emissions reduction and fuel efficiency technology, which would be a significant energy saver in these critical times of global warming — and it’s an example of the great British engineering tradition. The problem is, it’s been a very long road between drawing board and commercial success, and the company has been burning cash for years — and it’s needed a £12.4m share placing already this year.

Foecasts suggest Torotrak could be very close to break-even by the year ending March 2017, and there’s surely a possibility of profit the year after — but as recovery situations go, this one still looks too risky to me.

The world of fashion is a very risky one too, as French Connection Group (LSE: FCCN) shareholders know to their cost. The high-street chain has seen its share price lose two-thirds of its value since May 2014, to just 30.5p today, after the company recorded further ongoing losses at its interim stage this year — in fact, the shares fell 8% on results day itself as disappointment grew in line with the firm’s increasing losses.

The question is, with the firm restructuring and trying to reshape itself as a smaller but fitter business, could this be time to buy in the hope of a share price recovery? Well, French Connection has no debt — in fact, it was sitting on net cash of £23.2m at the halfway stage. So it doesn’t seem to be in any danger of going under in the near term. Investing in loss-makers in the hope of recovery is not my style, but if it is yours then you might be well advised to wait and see how Christmas trading goes this year.

Ruspetro (LSE: RPO) has suffered from the double-whammy of being a loss-making oil explorer at a time when oil prices have been plunging, and operating in Russia when that country’s international status is being steadily downgraded to pariah levels. The result has been a 90% fall in the share price in a little over two years, to just 4.3p today.

At the interim stage we heard that average daily production had risen by 16% to 3,914 bopd, though revenues fell from $27.8m to $24m in the period due to the oil slump. It sounds like the company has sufficient funding in place to be reasonably safe in the short term, and if an oil price recovery comes along in time it could be a nice recovery prospect — but for me, there really are some considerably less risky oil explorers out there if that’s what floats your boat.

The post Can Torotrak plc (-82%), French Connection Group (-67%) & Ruspetro PLC (-90%) Ever Pull It Back? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.