There’s more to come

When oil prices crashed in 2014, big producers launched urgent cost-cutting drives. The results have been impressive. For example, Shell now expects to be able to generate free cash flow of $25bn-$35bn per year at an oil price of $60 per barrel.

With Brent Crude now trading at about $76 per barrel, profits are soaring. The Anglo-Dutch group’s half-year adjusted earnings rose by 36% to $10.3bn this year.

Shell’s share price has now doubled since the start of 2016. But rising profits mean that the stock still looks reasonably priced to me, on 12 times 2018 forecast earnings and with an expected yield of 5.6%.

Looking ahead, earnings per share are expected to rise by 14% in 2019, giving a forecast P/E of just 10.5.

My view is that we’re still in the early stages of the next oil market upcycle. Even if oil prices weaken again, I see very little risk that Shell will need to cut its dividend. The firm held its payout unchanged through the recent oil price crash and is now operating with much lower costs.

I’d rate Shell stock as an income buy.

A growth opportunity

At some point, I suspect the ‘g’ word — growth — will start to appear in oil executives’ forecasts. When this happens, rapid profit growth could be slowed by rising spending, as firms invest in the next generation of oil and gas fields.

This will be the opportunity that oil services companies are waiting for. Customers such as Shell put these firms under huge pressure to reduce their rates during the downturn. In most cases, profits have not yet recovered.

One example is marine services group James Fisher & Sons (LSE: FSJ). During the first half of 2014, revenue rose by 20% in Fisher’s Offshore Oil division. Underlying operating profit climbed 32% to £11.9m.

According to figures published today, the same operations generated an underlying profit of just £1.2m during the first half of 2018. Revenue rose by just 1% during the period.

It’s clear that this group hasn’t yet seen much of a recovery in Offshore Oil. Fortunately this is only part of a much larger business, which includes shipping, offshore wind farm support and other specialist marine services.

An under-the-radar buy?

Today’s half-year results showed that James Fisher & Sons’ underlying operating profit rose by 18% to £24.5m during the six months to 30 June. Group revenue was 12% higher, at £260.5m.

When profits rise more quickly than revenue, we know that margins are improving. In this case, underlying operating margin rose from 8.9% to 9.4%. My calculations show that the group’s return on capital employed, another measure of profitability, has risen from 11.5% to 12.2% over the last six months.

I’m encouraged by this progress and attracted to the group’s broadening mix of customers.

Trading on a forecast price/earnings multiple of 20, the shares look fully priced at the moment. But in my view this could still be a good long-term dividend growth buy, with the aim of topping up on any market dips.

The post Why this FTSE 250 dividend stock could rise faster than the Shell share price appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here are two FTSE 250 shares which appear to offer narrow margins of safety. While they may be able to offer strong dividend growth potential due to improving financial outlooks, their investment appeal seems to be lacking.

Positive outlook

Reporting on Thursday was services provider to the marine, oil & gas, and nuclear industries James Fisher (LSE: FSJ). The company’s trading in the current financial year has been in line with expectations. Its Marine Support, Specialist Technical and Tankships segments have traded well, with signs of recovery being shown in Offshore Oil. Contract wins have been relatively high in the first four months of the year, and the business remains confident regarding its outlook for the full year.

Looking ahead, the company is expected to report a rise in its bottom line of 6% in the current year, followed by further growth of 3% next year. As such, its growth outlook is relatively modest and yet it trades on a high rating. For example, it has a price-to-earnings growth (PEG) ratio of 3.8, which suggests that it could be overvalued at the present time.

Certainly, James Fisher is expected to raise dividends per share by 20% over the next two years. However, with its dividend yield being around 2% and it lacking a wide margin of safety, it appears to be a stock to avoid at the present time.

Mixed future

Also seemingly overpriced is price comparison website operator Moneysupermarket (LSE: MONY). The company has an excellent track record of growth, with it increasing its bottom line in each of the last five years. During that time its earnings have risen at an annualised rate of over 13%, which suggests that it has been able to find a sound strategy.

However, the prospects for the business appear to be somewhat less impressive. In the current year it is due to report a fall in earnings of 1%, followed by a return to growth of 8%. While the latter figure may be relatively appealing, the company’s valuation suggests that investors may be anticipating a higher figure. It trades on a PEG ratio of 2.2, which indicates that it may lack upside potential.

While Moneysupermarket is expected to record a rise in dividends per share of 11% over the next two years and has a dividend yield of 3.5%, its valuation makes it relatively unattractive. While the FTSE 250 may be trading at a high level versus its historic performance, there could be stronger investment opportunities available elsewhere within the index.

The post Two FTSE 250 dividend growth stocks I’d sell straight away appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

To show you what I mean, I’m going to look at two FTSE 250 stocks which I believe have the potential to deliver a market-beating mix of growth and income.

Strong profit growth

Marine services group James Fisher & Sons (LSE: FSJ) has been in business for 170 years. But the group has changed greatly over this time. Its main focus is now on providing a range of specialist and essential services for the energy and transport industries.

Despite the oil market crash, Fisher shares have hit all-time highs since 2015. Today’s interim results revealed that the group’s underlying pre-tax profit rose by 6% to £18.6m during the first half. The interim dividend will rise by 10% to 9.4p.

Rising demand

Nick Henry, the group’s chief executive, says that a combination of new renewable energy projects and an increase in oil and gas-related activity means that the second half should be stronger. Mr Henry expects “a good improvement in the result for the year”.

Fisher shares rose by 3% when markets opened this morning. This suggests to me that today’s figures and the firm’s full-year guidance were slightly better than the market expected.

Based on current consensus forecasts, James Fisher stock trades on a forecast P/E of 18 with a prospective yield of 1.9%. Although this isn’t cheap, I believe Fisher is likely to continue performing well and could reward buyers at current levels.

Boring but profitable

The engineering business of Hill & Smith Holdings (LSE: HILS) is even less glamorous than that of James Fisher. But it’s very profitable. This £1bn company specialises in making products used when building roads and utility infrastructure.

Examples include street lighting, crash barriers, steelwork for bridges and fencing. These may sound like generic products, but in many cases they’re required to meet tough regulatory standards. They’re not easily substituted with cheaper alternatives.

The group’s recent half-year results confirm the appeal of its business. Sales rose by 6% on a constant currency basis, while underlying operating profit was 13% higher, at £38.8m. The group’s operating margin rose by 0.8% to 13.3%.

Shareholders were rewarded with an 11% increase in the interim dividend, which rose to 9.4p per share. It’s worth noting that dividend growth at this group has averaged 15% per year since 2011, and the payout has not been cut since at least 2002. It’s a reliable income stock.

Strong outlook

The group gets more than 80% of sales and 87% of its underlying operating profit from the UK and US. Management expects both of these markets to see significant infrastructure investment over the next few years, providing a strong outlook for growth.

City analysts expect Hills & Smith’s underlying earnings to rise by 10% to 72.2p per share this year. This puts the stock on a forecast P/E of 18, with a potential yield of 2.3%. As with James Fisher, I believe it could be worth paying this price now to get access to the long-term growth potential of this quality business.

The post 2 top FTSE 250 income and growth stocks I’d buy today appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. 

Mining riches

Evraz (LSE: EVR) shares have more than trebled over the past 12 months, to 237p, gaining 3% on the day the Russia-based miner and steelmaker posted 2016 results.

At the halfway stage, Evraz reported a 38% crash in EBITDA, largely due to falling prices for iron and steel. But a partial recovery in commodities coupled with $316m in cost savings led the firm to turn that around by year-end. Full-year consolidated EBITDA was reported as being up 7.2% with an improving EBITDA margin, though asset impairment contributed to a reported net loss of $88m.

Cost reduction also helped the firm to a lowering of net debt, from $5.3bn to $4.8bn.

Evraz bills itself as “one of the lowest-cost producers of steel and raw materials in Russia“, and further strengthening of prices for its products should give it a significant advantage over many of its rivals. 

In fact, analysts are already forecasting earnings performances that would drop the P/E as low as 9.7 by 2018. After being suspended in 2013, the dividend should be back to a yield of around 2.5% by then too.

Is it time to buy Evraz shares now? The company still has some tough debt problems to face, with interest cover for its outstanding facilities not really looking too great. But the firm says it has enough cash and committed credit facilities to cover debts maturing in 2017 and 2018, and that should hopefully be enough to see it through.

It’s a risky investment right now, but if iron and steel prices keep moving upwards, I can see Evraz providing further rewards for shareholders.

Marine services

My second pick is a very different company, James Fisher & Sons (LSE: FSJ), which provides services to the marine and nuclear industries. Here we’ve seen a 77% share price rise since November 2016, to 1,616p, including a 16p gain on the day full-year results for 2016 were released — and a near-doubling in five years.

I’m seeing a growth star here that has attracted some serious attention, as the shares’ P/E multiple of around 20 will attest. But though there’s clearly further growth already factored-in to the current price, I don’t see the shares as overpriced and I think there should be more to come.

Figures released Thursday were up across the board, with underlying pre-tax profit and underlying EPS both up 11%, and the total dividend was boosted by 10% to 26.15p per share — that’s a yield of only 1.6%, but it’s around three times covered by earnings.

Chief executive Nick Henry spoke of “the continued resilience of the James Fisher business model with its well-balanced spread of activities across the marine sector and international markets“. He said business across the firm’s divisions looks good, and he predicted “further growth and value for our shareholders in the future“.

Brexit shouldn’t cause much of a headache, with the company having “only a small presence in Europe outside the UK and Norway“.

On the same day as these results, James Fisher announced a new Saturation Diving contract with Shanghai Salvage for delivery in the second half of 2018, and with order books already strong, I reckon the next five years should be kind to shareholders.

The post 2 high-flying FTSE 250 shares that could have further to go appeared first on The Twelfth Magpie.

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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.

A popular proposition

One such diamond in the rough is £200m market cap maker of gaming machines Quixant (LSE: QXT). Quixant designs, manufactures and sells the hardware and software for casino gaming products such as slot machines. This has been big business for Quixant and since going public in 2013 revenue has more than doubled, sending its share price up over 345%.

The key to Quixant’s growth has been offering major game machine makers high-end, integrated hardware and software at an unbeatable price point. This is, unsurprisingly, a popular proposition for customers and Quixant has been quickly increasing its market share. In the latest half-year results gaming division revenues jumped 56% year-on-year due to a deepening relationship with its largest customer and new work from secondary clients.

There’s little reason for this growth to slow down as the industry gradually consolidates and Quixant offers the added appeal of beginning to sell the touch screen monitors that go alongside gaming machines. This diversification was achieved with the £7.6m purchase of monitor maker Densitron in late 2015 and is already showing results.

Quixant shares are pricey at 25 times forward earnings, but the company offers many qualities investors should love: a healthy balance sheet, solid EBITDA margins of 14.5%, fast growing sales and a founder-led management team that owns roughly 30% of the company.

Reason to be excited

Another relatively unknown company that deserves more attention is marine services provider James Fisher and Sons (LSE: FSJ). Shares of the company are up over 200% in the past five years, as organic growth and acquisitions have cemented the company’s leadership in a bevy of niche markets. These markets cover everything from hull stress monitoring to ship-to-ship transfers and remote inspection systems for nuclear facilities.

Branching out into a variety of business lines makes considerable sense for James Fisher, as the company’s high reputation and decades of industry knowledge reassure customers who always need dependable, high-quality suppliers. The benefits of this diversified business model are apparent in the company’s latest half year results to June, in which revenue and profits remained broadly level despite a 25% drop in revenue from the important offshore oil & gas segment, thanks to the challenging industry environment.

At 21 times forward earnings a lot of growth is already baked into share prices, but I still see reason to be excited about James Fisher’s future. The company’s balance sheet is in good health with net debt to EBITDA ratio of only 1.8x at the end of June providing firepower for further bolt-on acquisitions. Organic growth prospects are also quite rosy as the company moves into fast growing regions of the world. With a laser-like focus on cash generation and return on capital, a long history of growth and a diversified business model James Fisher and Sons is just the type of dependable small cap that investors of all stripes should take a closer look at.

The post 2 secret growth stocks to watch in 2017 appeared first on The Twelfth Magpie.

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• 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?

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.

Commodities confidence

Since the start of the year, shares in Lonmin (LSE: LMI) have soared by a whopping 184%. A key reason for this has been improving investor sentiment that has resulted from a brighter outlook for the wider commodities sector. Although commodity prices are still under pressure, they’ve stabilised somewhat and this has caused investors to become more bullish about the prospects for Lonmin and its peers.

However, Lonmin has also performed well because of internal as well as external factors. For example, it has successfully raised funds to conduct a major restructuring that has seen costs cut, efficiencies made and a leaner and potentially more profitable company created. Although Lonmin is expected to remain in the red in the current year, it’ s due to move into profitability next year and this could cause investor sentiment to improve. The end result of this may be a higher share price.

Of course, Lonmin remains a relatively high-risk stock and commodity price falls could easily swing its share price the other way. However, the overall risk/reward ratio remains bright and for less risk-averse investors, Lonmin continues to hold significant long-term appeal.

Long road ahead

Improving investor sentiment towards the commodity market has also improved the share price performance of fellow resources company Sirius Minerals (LSE: SXX). Although it’s still some years away from being a producer, Sirius Minerals’ share price is nevertheless closely tied to the performance of the wider mining sector since it needs major financing to get its project off the ground.

Even the first phase of the proposed potash mine in York will cost upwards of £1bn and with investors being nervous throughout much of the early part of 2016, the prospects for raising the required funds seemed less certain. However, rising commodity prices have helped to push Sirius Minerals’ share price 49% higher since the start of the year and this trend could continue if the company is able to deliver positive news regarding its planned development.

Clearly, Sirius Minerals remains a high-risk play and with the mining sector being so cheap there are other highly profitable bargain stocks on offer. But for less risk-averse investors with a very long-term view, it could be worth a closer look.

Upbeat outlook

Meanwhile, shares in James Fisher (LSE: FSJ) have also benefitted from improved investor sentiment this year. The engineering solutions provider has recorded a rise in its valuation of 19% year-to-date and this trend could continue as investors may be attracted to the upbeat growth outlook of the business.

For example, in the current year James Fisher is expected to record a rise in its earnings of 7%, followed by further growth of 12% next year. This would be a major improvement on the 8% fall in earnings that was recorded last year and could help to boost the market’s view of the company. And with its shares trading on a price-to-earnings growth (PEG) ratio of just 1.4, they seem to offer a wide margin of safety as well as a favourable risk/reward ratio for the long term.

The post This thing could put a rocket under these 3 shares appeared first on The Twelfth Magpie.

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Peter Stephens 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.

Driller dives

Oil services provider James Fisher & Sons (LSE: FSJ) has enjoyed a rich vein of form in recent weeks.

The firm’s share price leapt almost 60% in little over ten weeks to May’s two-year peaks above £15, James Fisher rising in tandem with Brent crude’s explosion above the $50 per barrel marker.

But investor nerves were shaken last week after OPEC once again missed the opportunity to curb output levels. The move didn’t come as much as a surprise to industry commentators given the economic and political friction across the oil cartel, but this could not prevent James Fisher from sinking through the floor.

I have long argued that stock pickers should avoid oil-related stocks until major producers begin to cork supply, and demand indicators improve markedly to soothe bloated inventories.

So with James Fisher boasting an expensive forward P/E rating of 18.1 times, and the prospect of further capex cuts from the oil industry looming, I reckon there is plenty of room for the engineer to keep falling.

Still misfiring

Defence play Cobham (LSE: COB) once again shocked the market last week, its stock consequently sinking to its lowest in more than a decade.

On Wednesday Cobham advised that it will raise £506.7m via an equity placing that will see one new share issued for every two. But investors were taken aback by the 45% discount to the prior night’s price — new shares are priced at just 89p.

And question marks abound as to why Cobham has elected to keep paying dividends to its shareholders under the current circumstances.

Chief executive Bob Murphy commented that “the rights issue will put Cobham on a sound financial footing by reducing gearing towards its target of below 2 times net debt to EBITDA.”

But given the ongoing travails Cobham still has to overcome in key markets — not to mention question marks over the company’s strategy to mend its broken finances — I reckon investors should give the firm short shrift, despite a conventionally-low forward P/E rating of 10.2 times.

Drive home a bargain

Car and cycle giant Halfords (LSE: HFD) also collapsed last week following its latest set of trading numbers. But I reckon stock pickers could be missing a trick here.

Halfords saw total sales increase 1.7% during the 12 months to April 2016, to £1.02bn, or 1.5% on a like-for-like basis. However, this could not prevent pre-tax profit slipping 1.2% to £79.8m as restructuring costs weighed.

Still, I believe the fruits of its store expansion scheme — not to mention steady roll-out of new product ranges — should underpin solid sales growth in the years ahead.

Indeed, sales across Halfords’ Cycle division have gained momentum following last summer’s weather-related blowout. And sales of the firm’s car-related parts — not to mention activity at its Autocentres — are also performing healthily.

With the company dealing on a prospective P/E rating of just 12.6 times, I reckon now is a great time for value investors to pile in.

The post Can last week’s losers James Fisher & Sons plc (-15%), Cobham plc (-15%) and Halfords Group plc (-9%) kick higher? appeared first on The Twelfth Magpie.

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• 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?

Royston Wild 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.

Traders are filling their boots with mining stocks after fears over China sucked prices lower yesterday, and BHP Billiton, Glencore and Antofagasta are representing the top three risers in today’s session. But it should not be forgotten that sustained concerns over commodity market imbalances has driven these firms’ stock prices 47%, 59% and 29% lower respectively during the past 12 months.

Falkland falters

This giddy trading backdrop even helped drive shares in explorer Falkland Oil & And Gas (LSE: FOGL) to the upside despite warnings of fresh difficulties. The London firm swallowed a $1.96m pre-tax loss in the first six months of 2015, increasing from the $1.3m loss printed in the same 2014 period.

Falkland also advised that results from its deepwater Humpback well were not expected until next month due to “a series of unforeseen equipment and operational issues” — work had been expected to be completed this month. On top of this, cash balances also collapsed to $40.1m from $68.7m at the same point last year. As revenues are not expected to flow in for some time yet, I believe Falkland is at severe risk of significant balance sheet deterioration, particularly if crude prices keep on sinking and the economic viability of its projects come under increased scrutiny.

Reduced revenues smash James Fisher

Naturally the result of tanking oil prices can play havoc with related industries, and so it was the case with rig builder James Fisher & Sons (LSE: FSJ) during the first half. The business announced that weakness at its Offshore Oil division drove pre-tax profit to £17.8m during January-June from £21.9m a year ago. James Fisher commented that clients had “postponed all but the most urgent maintenance and repair expenditure” in light of persistent market difficulties.

Operators across the natural resources sector are repeatedly taking the hatchet to their capex budgets, and BHP Billiton just today cut its spending target to $8.5bn for this year from $9bn previously. As commodity prices continue to sink, and oil and metals producers consequently ramp up their cash-saving measures, the outlook is likely to remain equally worrisome for James Fisher and other support service providers.

Weak gold dents Polymetal

And gold miner Polymetal International (LSE: POLY) is also facing the prospect of prolonged revenues pain as precious metals also slide. The Jersey company noted today that revenues fell 11% during January-June, to $648m, as gold and silver prices ducked 7% and 18% correspondingly during the period. Although cash costs came down, pressure on the top line forced adjusted earnings 4% lower to $297m.

Even though gold’s role as a traditional safe-haven have enabled the price to remain stable around $1,150 per ounce in recent days, hurdling the weak sentiment washing across most other asset classes, the outlook for the yellow metal remains uncertain as an environment of low inflation, weak physical demand and caution surrounding Fed rate hikes continues to hover. Consequently I expect sales at Polymetal to keep languishing.

The post Should You Buy Falkland Oil And Gas Limited, Polymetal International PLC & James Fisher & Sons plc Following Today’s Results? appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
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Lonmin

With precious metals prices under sustained pressure I believe earth digger Lonmin (LSE: LMI) is a stretch too far for savvy investors. Share prices have tanked 54% since the start of July alone as commodities prices have collapsed, a rout that has seen key resource platinum sink to its cheapest since 2009 at $960 per ounce. And it is easy to see this descent worsen as demand from the critical automotive and jewellery sectors drags.

Lonmin has announced plans to shutter its Hossy and Newman mines and suspend operations at a further three projects in response to these woes, as well as to cut 6,000 of its workforce. The City currently expects the miner to finally plunge into the red for the year ending September 2015 with losses of 9.9 US cents per share, and despite its restructuring plan it is hard to see Lonmin recovering any time soon considering the platinum market’s chronic supply/demand imbalance.

TalkTalk Telecom Group

Conversely, I believe that telecoms giant TalkTalk (LSE: TALK) is a solid bet for those seeking white-hot growth prospects. The business has seen its stock price erode 19% during the past four weeks, but I reckon this presents a fresh buying opportunity — despite recent softness in its broadband business due to “higher promotional activity,” group revenues still rose 3.5% during April-June, it advised last month.

Recent acquisitions like blinkbox and Tesco Broadband have significantly boosted its position in the multi-services market, while recent initiatives like its ‘Unlimited SIM’ for mobile customers are also proving a winner. Accordingly the number crunchers expect TalkTalk to punch earnings growth of 83% and 55% in the years ending September 2015 and 2016 correspondingly, projections that drive this year’s P/E multiple of 20.8 times to a terrific 12.7 times for the following period.

James Fisher & Sons

Investor appetite for oil hardware specialist James Fisher & Sons (LSE: FSJ) has remained on the rocks thanks to a wallowing crude price, and the business’ shares have dropped 18% since the beginning of July alone. The company advised in its latest financials that “weaker market conditions” had slapped its Offshore Oil division during January-March, and with capex reductions speeding up across the industry I believe such problems could be set to accelerate.

Indeed, just last week Shell and Centrica announced massive rounds of job cuts thanks to the oil sector’s murky outlook — just this week the Brent benchmark slipped back below $50 per barrel for the first time since January. Currently the City expects James Fisher & Sons to record earnings growth of 5% this year, but I am not so optimistic given the massive overhaul across the oil industry. So although a P/E multiple of 14.6 times for 2015 is far from terrible, I believe a reading closer to the bargain barometer of 10 times would be a fairer reflection of the risks facing the rigbuilder.

Aggreko

Like James Fisher, I reckon that Aggreko (LSE: AGK) is a stock not for the feint-of-heart. Shares in the business have dived 17% during the past month, a performance not helped by its latest trading statement where the power generator provider advised that thanks to “further slowdown in our North American oil and gas related business” — not to mention security problems in Yemen — the company now expects full-year results to miss previous estimates.

I had previously been pretty bullish on the firm’s earnings prospects owing to its diversification across a number of engineering and construction sectors. But with troubles in the oil industry continuing to intensify, I believe Aggreko’s projected 4% earnings downgrade for 2015 could be in line for further downgrades. And like James Fisher, an earnings multiple of 15.5 times is hard to justify in this climate.

The post Should You Buy Bombed-Out Lonmin Plc, TalkTalk Telecom Group PLC, James Fisher & Sons plc And Aggreko plc? 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?

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

GlaxoSmithKline

I believe that pills play GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) is a terrific selection for those seeking a top-notch turnaround stock. After suffering three years of earnings declines due to crippling patent losses, the company’s attempts to supercharge its product pipeline are clearly paying off handsomely — indeed, GlaxoSmithKline announced this week that it has developed a shingles vaccine which boasts an astonishing 97% success rate in adults.

The result of massive organic investment, ongoing acquisition activity and synergies with industry peers are not expected to herald an immediate turnaround, however. But an expected 5% bottom-line decline this year is expected to be followed with a much-awaited bounceback in 2016, to the tune of 3%. And I expect GlaxoSmithKline’s terrific R&D department to deliver the next generation of significant, long-term revenues drivers, helped by surging healthcare spend in emerging regions.

The pharma giant currently changes hands on P/E multiples of 17.1 times and 16.3 times prospective earnings for 2015 and 2016 respectively, just above the benchmark of 15 times which signals attractive value. But I believe the huge potential of GlaxoSmithKline’s operations warrant this slight premium, while expected dividends around 80.9p per share through to the close of next year produce a market-smashing yield of 5.3%.

Royal Mail

Parcel and letters mover Royal Mail (LSE: RMG) has been one of the larger movers in Thursday business and was recently dealing 5% higher on the day. And I can understand this bullish investor sentiment as the courier looks set to enjoy the fruits of surging packages demand at home and in Europe in the coming years on the back of galloping online shopping activity.

With Royal Mail also rolling out improvements to its operations — such as improving its service at weekends — and embarking on a massive restructuring programme, I believe that earnings are on course to surge looking ahead. The City expects the firm to record a 13% earnings dip in the year concluding March 2016 as heavy investment weighs, but a 13% rebound is predicted for the following 12 months. These forecasts push the P/E multiple from 17.6 times for this year to just 14.5 times for 2017.

As well, Royal Mail’s generous dividend policy is also expected to keep on delivering the goods, with analysts pencilling in payments of 20.9p and 21.3p per share for 2016 and 2017 correspondingly. These forecasts create delicious yields of 4.7% and 4.8%.

James Fisher & Sons

Undoubtedly the high-quality, diversified operations of James Fisher & Sons (LSE: FSJ) sets it apart from many of the engineering plays listed on the London Stock Exchange. But with today’s trading update underlining the chronic weakness across its critical Offshore Oil segment — an issue which has driven shares in the firm 10.6% lower today — I believe the business is a risk too far at the current time.

James Fisher reported that “the current round of restructuring in the oil industry has slowed customer decision making and contract awards generally.” With fossil fuel explorers and producers of all shapes and sizes all slashing capital expenditure, as the oil sector’s worsening imbalance threatens to drive crude prices through the floor again, I believe that demand for the business’ services could continue to disappoint..

Consequently I reckon City expectations of earnings rises to the tune of 8% in 2015 and 7% for 2016 could come under pressure. And with James Fisher dealing on P/E multiples of 16.9 times and 16 times for these years I believe the share price still fails to adequately reflect the chronic risks facing the company.

The post Why I Would Buy GlaxoSmithKline plc And Royal Mail PLC But Sell James Fisher & Sons plc appeared first on The Twelfth Magpie.

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