The following two FTSE 250 companies both operate in the sector and recent share price performance has been poor. At some point they will recover, but you may need to show a bit of patience with these two. 

Weir Group

Glasgow-based engineer and hydraulic pump maker Weir Group (LSE: WEIR) gives you exposure to global oil, gas, mining and energy markets, with 15,000 staff operating in more than 50 countries. Investors have been served less well than its customers, with the share price trading 40% lower than five years ago, and down 15% in the last year.

Today’s positive interim statement nudged the share price up by 3%, as it reported Q3 growth was underpinned by its expanded mining equipment offering. Chief executive Jon Stanton said the highlight was the record £100m order for an industry-leading crushing solution for the Iron Bridge Magnetite Project in Australia, which reflects the group’s “growing technology offering and focus on making mining smarter, more efficient and sustainable”.

Weir’s project pipeline in mining remains “encouraging”, despite deferred projects “due to negative macro sentiment”, while the group has been forced into a £30m cost reduction programme due to falling demand from its North American oil and gas markets.

Stanton said full-year 2019 operating profits are below previous guidance in its Oil & Gas division, while both Minerals and the recently acquired ESCO division remain unchanged. The £3bn turbine and valve maker currently trades at 15 times earnings, despite its recent share price disappointments and lower earnings projection growth estimates. The forecast yield is a steady 3.4%, with cover of 1.9. With no sign of an immediate oil sector resurgence, I’m in no rush to buy it today.

Petrofac

Investors in oilfield service provider Petrofac (LSE: PFC) have had an even bumpier ride, with the stock down 65% over five years, and 33% over 12 months. As well as the oil sector slowdown it has also been hit by a Serious Fraud Office (SFO) investigation into Middle East bribery allegations, which is still ongoing. This means prospective buyers have no idea what the ultimate cost will be in terms of fines, penalties and market reaction.

Risk takers might want to take advantage of the uncertainty, which leaves the Petrofac share price trading at just 6.1 times forward earnings. The forecast yield is a whopping 7.4%, generously covered 2.1 times.

Petrofac is a “capital-light business”, especially since the recent $276m sale of its remaining interest in its Mexican operations to Perenco International, with the proceeds used to reduce gross debt. I can’t say the £1.4bn group looks particularly tempting today, with earnings forecast to fall 22% this year and 7% in 2020. Although by then the dividend will be a thumping 7.9%.

If you are a contrarian investor who is bullishly expecting an oil price recovery and doesn’t mind the bribery investigation, then Petrofac could be a good way to play it. If so, good luck, because I won’t be joining you.

The post These 2 FTSE 250 dividend stocks could make great turnaround plays. If you’re patient appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Weir. 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.

Rio to go

Rio’s full-year earnings were better than expected with revenues up $500m to $40bn and earnings rising 2% to $8.8bn. That $4bn special dividend, funded from the sale of its Grasberg copper mine in Indonesia and other non-core assets which raised $8.6bn, works out at $2.43 per share. It comes on top of a final dividend of $1.80 per share.

Rio Tinto is now even more focussed on iron ore, mainly in Australia, and plans to produce 338m-350m tonnes in 2019. Copper production was mixed with a potential major new discovery in Australia offset by a delay at another large site in Mongolia.

Cashing in

Shareholders can anticipate further long-term cash returns, which Rio said should be in a range of 40-60% of underlying earnings. Net debt of $4.1bn has turned into a net cash position of $300m, including cash and highly liquid investments of $13.3bn. That puts it in a strong position in case of a Chinese or commodity downturn.

This £56bn giant trades at just 11.6 times forecast earnings and its forward yield is 5.4%. Numbers like that could put some iron in your portfolio. Rupert Hargreaves reckons it could help you make a million.

Pump it up

Engineer and hydraulic pump maker Weir Group (LSE: WEIR) is up around 3% today after announcing a 13% jump in like-for-like full-year operating profit to £348m, or 22% at constant currency. Orders rose 15% on a like-for-like basis to £2.54bn, with revenues up by the same percentage to £2.45bn. Aftermarket orders exceeding £1bn for the first time. The group also posted an 86% increase in total group cash from operations to £411m.

On Monday, Weir sold its flow control arm to private equity investment firm First Reserve for £275m, as it refocuses its operations. Today, it said that its mining and infrastructure markets should “continue to benefit from positive industry fundamentals with oil and gas activity to improve modestly from current levels.”

The outlook was positive with the group expecting to deliver “another year of good constant currency revenue and profit growth.”

Happy returns

Weir is very much plugged into the global energy market that can be volatile, but the underlying business is strong. It’s down 20% in the past year (although it is hardly alone in that respect). It looks close to fair value right now, trading at 15.1 times earnings, with a PEG of 0.9. A return on capital employed of 18.9% is respectable, as is the 3% forecast yield, which has cover of 2.3. 

Today, the dividend was increased 5% to 46.2p a share. Management has shown Weir can maintain its dividends even in tough times. Earnings forecasts are positive, with analysts anticipating 16% in 2019, and again in 2020. A lot depends on the global economy. Will we get that global recession, or are green shoots already emerging?

The post £2,000 to invest? Then I’d consider these 2 growth and income stocks today appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Weir. 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.

No, I do not, and I can see what he likes in the company.

Looking back over the past few years, the packaging company has been steadily growing its earnings per share — and is expected to continue to so so for the next two years too.

An update on Tuesday supported the upbeat forecasts, as the firm told us it expects “return on sales and adjusted operating profit in the half-year to be materially ahead of the comparable period.” In addition, the company anticipates “cash flow from operations to be significantly ahead of the prior period.”

Competition

As Royston pointed out, the share price rout has been triggered by intensifying competition from Chinese rivals, so some uncertainty is surely justified. But as so often happens, I think the market has overreacted to the news and I see the shares as oversold now.

What we’re looking at is a share priced at under 10 times its forecast earnings for the year to April 2019, with EPS expected to grow sufficiently to drop the PEG ratio a tempting 0.6 (which is typically seen as a good indication of an undervalued growth stock).

On top of that, analysts are expecting to see dividend growth resuming this year, with a twice-covered yield of 4.3% on the cards, rising to 4.6% by 2020.

Back to growth

Shares in Weir Group (LSE: WEIR) also spiked on Tuesday, gaining 6% on the back of a third-quarter update which lent support to the company’s recovery and return to earnings growth.

While balancing “strong order growth in mining” with a “temporary slowdown in North American oil and gas,” the engineering firm reported a 16% rise in Q3 orders from continuing operations (and a 40% boost once contributions from recently acquired ESCO are included).

Weir has been hit by the slowdown in the oil and gas sector and the slump in commodity prices, but with markets getting back up to healthy levels, demand is clearly on the up again. And even with the North American slowdown, oil and gas orders were still up 10% in the quarter — and EBITA from oil and gas is expected to come in around £90m to £100m.

Strengthening orders

Chief executive Jon Stanton told us that “orders continued to grow strongly in markets that have good long-term prospects,” also voicing the firm’s view that it is “in the early stages of a multi-year capex growth cycle.”

Analysts appear to agree, with forecasts of 20%+ EPS growth for this year and next dropping the potential P/E to 12.6 next year, and again giving us tasty PEG indicators — of 0.7 and 0.6 for this year and next.

While Weir’s predicted dividend yield is not as high as DS Smith’s at only around 3%, the company maintained its payout through the past few tough years, and progressive rises look set to resume with strong cover of 2.6 times on the cards for 2019.

The post 2 growth and dividend stocks I’d buy with £2,000 right now appeared first on The Twelfth Magpie.

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• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith and Weir. 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.

Weir specialises in equipment for the oil, gas and mining industries. It’s already made a strong recovery from the recent downturns in both sectors. Today’s news means that the firm will increase its focus on the mining sector, which is already its largest customer.

Let’s take a look at trading first and then see how the ESCO acquisition might fit into the picture.

Sales up by 22%

Orders rose by 22% during the first quarter, compared to the same period last year. The mining business performed well, with orders up by 13%. However, the oil and gas division rocketed ahead of this with a 50% surge in orders for pumping equipment, mostly from US shale drillers.

The company was already expected to do well this year and at this point, full-year forecasts have been left unchanged. However, I suspect that if this strong momentum continues through the first half, full-year forecasts could be notched higher.

What about the acquisition?

ESCO Corporation is a market leader in “surface mining ground engaging tools”. The company’s products include the giant buckets and shovels used by miners to dig huge holes in the ground.

The $1,285m purchase price equates to 12.6 times ESCO’s 2018 forecast earnings before interest, tax, depreciation and amortisation (EBITDA). That seems fully priced to me, but if the mining market continues to expand for the next few years, the deal could prove to be quite reasonably priced.

It’s quite a big acquisition for Weir, and the firm intends to use a mix of shares, cash and debt to fund the transaction. The group’s slowest-growing division, Flow Control, is also being placed up for sale.

A lot of new shares will be issued to help fund this deal. Full-year earnings forecasts are likely to change significantly as the new shares and ESCO’s earnings are factored into analysts’ projections.

However, my view is that Weir probably remains good value on a three-to-five-year timescale.

Flying high already

I’m less convinced by the investment case at FTSE 100 engineer Rolls-Royce Holding (LSE: RR). The group recently announced the sale of its L’Orange fuel injection business for £610m, which will reduce debt levels and make cash available for other acquisitions.

However, the latest news from the company suggests that challenges remain in its jet engine business. Around 380 of its Trent 1000 engines require additional inspections due to potential problems with the “Package C compressor“. This will have a cash impact.

The additional cash cost hasn’t been specified, but Rolls has admitted that it plans to delay certain non-essential spending in order to avoid cutting its full-year guidance.

My view

Chief executive Warren East seems to be doing a good job of transforming this complex business. I’ve no doubt Rolls-Royce will make a full recovery. My concern is that the shares already look quite fully priced, trading on 27 times 2019 forecast earnings.

It’s not clear to me if the company’s profits can return to the levels seen in the past. If they do, the shares could be good value at present. I’m not entirely convinced, so I’m happy to stay on the sidelines and risk missing out.

The post One dividend growth stock I’d buy ahead of FTSE 100 member Rolls-Royce 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 recommended Weir. 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.

Weir strong

The results are headlined “Delivering strong growth and strategic progress” and included a 20% rise in group orders as demand for its technology and services increased in its main markets. Profits before tax rose 47%, driven by excellent growth and operational leverage from oil and gas.

Weir is benefitting from the oil price resurgence and increased activity in US shale, which has boosted demand for its drilling and fracking equipment. Oil and gas orders increased 67% last year, with North American upstream increasing a whopping 82%. Return on capital employed increased 290 basis points.

Digging deep

Investors will also have been buoyed by this line from CEO Jon Stanton: “Looking to 2018, assuming market conditions remain supportive and despite anticipated foreign exchange headwinds, we expect to deliver strong revenue and profit growth and further balance sheet deleveraging.“ 

Stanton said the industrials group has worked closely with customers to identify opportunities to increase their productivity and invested early to take full advantage of improving conditions. This drove order momentum in its minerals operation, which delivered consistent growth in its high-margin, cash-generative after-market, and positioned it decisively for the anticipated upturn in the mining capital cycle. Its oil & gas operation took full advantage of improving markets in North America.

The £4.57bn company’s forward valuation of 16.9 times earnings now looks relatively undemanding, given today’s success, while its PEG is just 0.4. City analysts are pencilling in 39% earnings per share (EPS) growth for 2018, and 15% in 2019. Current yield is 2.4%, covered a healthy 2.5 times. My Foolish colleague Peter Stephens reckons it is a buy. Nothing more to add except a cheery: Here Weir go.

Buy BP

Oil and gas giant BP (LSE: BP) has also had a bumpy few years due to the fluctuating oil price, although it has also suffered a few embarrassing personal problems. The share price is slowly getting out of deep water, even if the last month has been bumpy. Brent crude at $70 a barrel was a turbocharger, although it may get little further support from that corner as energy prices slip.

RBC Capital Markets still reckons BP is set to outperform after the last year of transition, due to its growing upstream base and favourable dynamics in the downstream, the latter of which “may be under-appreciated by the market”.

$30 oil

My Foolish colleague Rupert Hargreaves is more than appreciative, recently naming BP the buy of the decade. With management driving down its break-even point to $47 per barrel last year and targeting somewhere in the $30s, BP could continue to pump out the profits even if the oil price plunges again.

The £95bn energy behemoth trades at a forecast valuation of just 15.1 times earnings, good for a company with such major prospects. Its EPS are forecast to rise a whopping 156% this year. The yield is 6.1%. If BP is not in your portfolio, you must really hate oil companies.

The post BP plc and this growth monster could make you stunningly rich appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended BP and Weir. 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.

The firm’s all-important Oil & Gas division has seen a 59% rise, while the Minerals division, which serves mining customers, saw orders increase by 12%. So why did Weir fall by around 6% when the market opened?

Unfortunately, today’s update also included a profit warning. Operating profit is now expected to be “slightly lower than previously indicated” this year. According to management, this is because of project timing in the Minerals division, along with investment in future growth and plant reconfiguration.

Should investors be worried?

Digging into the detail in today’s statement, it seems that despite impressive order growth during the third quarter, Weir’s overall order book may have shrunk slightly during this period.

The group’s book-to-bill ratio — which compares new orders with billed-for completed work — fell from 1.06 at the end of June to 0.95 at the end of September. A number below 1 indicates new orders aren’t sufficient to replace completed work.

I see this as a short-term issue that’s unlikely to persist. The company’s main markets — oil and mining — are enjoying periods of recovery and growth. Looking ahead over the next few years, I’d expect Weir to do the same.

After today’s fall, the stock trades on a forecast P/E of around 22, with a prospective yield of 2.2%. In my view, this is probably about right. I’d continue to hold, but I don’t see the shares as a compelling buy.

How safe is this triple-bagger?

Shares of copper miner KAZ Minerals (LSE: KAZ) have risen by 186% over the last year. That’s pretty close to a triple-bagger.

However, this spectacular recovery is also a reminder of the biggest risk facing KAZ Minerals’ shareholders — debt. At the end of 2016, the group had net debt of $2.7bn and full-year earnings before interest, tax, depreciation and amortisation (EBITDA) of just $492m.

This gave the stock a net debt-to-EBITDA ratio of 5.4, more than double the widely-used limit of 2.5 that most investors find comfortable. The outlook was decidedly risky.

Fortunately, things have improved since then. The price of copper has risen by about 40% over the last year. Alongside this, KAZ has ramped up its own output, increasing its guidance for full-year copper production from 225,000-260,000 tonnes at the start of the year to 250,000-270,000 tonnes at the end of September.

Selling into a rising market has helped to boost the group’s earnings. During the first half of this year, EBITDA rose to $505m. This six-month figure is roughly equal to EBITDA for the whole of last year.

As a result, the group’s net debt had fallen to $2.2m by the end of September, a reduction of more than $400m in nine months.

I still wouldn’t buy

Although KAZ trades on a 2017 forecast P/E of 11, the group pays no dividend and appears to have cut capital expenditure to a minimum in order to fund interest payments and debt reduction. This situation may be hard to sustain without sacrificing future production growth.

I think the risk of disappointment is growing. I’d take profits on KAZ.

The post Why I’d ditch this triple-bagging growth stock today appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Roland Head has no positions in any of the shares mentioned. The Motley Fool UK has recommended Weir. 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.

Finding shares which offer upbeat growth prospects at a fair price can be challenging. That’s especially the case at a time when major indices are trading close to record highs. In many cases, margins of safety are now fairly narrow and this means the risk/reward ratios on offer may be somewhat unattractive.

However, there are exceptions. Some stocks could still offer significant upside potential. Here are two prime examples that could help to propel you towards millionaire status in the long run.

Solid growth

Reporting on Thursday was developer and manufacturer of patented touch sensor products Zytronic (LSE: ZYT). The company updated the market with a pre-close statement ahead of its results for the period to 30 September. Revenue has continued to show encouraging progress compared to the prior year, with the company’s results expected to be in line with market expectations.

While it was a relatively short statement, the company’s share price fell 3% in response. This could be due to profit taking, since the stock has risen by around 60% in the last year.

Looking ahead, Zytronic is forecast to post a rise in its bottom line of 4% in the next financial year. While this is lower than the expected growth rate of the wider index, the company has a reliable track record of growth.

For example, in the last three years it has recorded an annualised growth rate of 24%. This shows that it has the potential to outperform the wider index when it comes to growth. And with what appears to be a sound strategy and growing demand for its products, now could be the right time to buy it for the long term.

Turnaround potential

Also offering investment potential at the present time is fellow industrials sector company Weir Group (LSE: WEIR). The company has endured a difficult few years as the price of oil has fallen and negatively impacted on activity within the oil and gas sector. This has contributed to four years of declines in the company’s earnings, which has put investor sentiment under pressure.

Looking ahead however, the company is expected to record a strong turnaround. Weir Group is forecast to deliver a rise in its bottom line of 52% in the current year, followed by further growth of 31% next year. This could be partly because of renewed confidence in the oil and gas industry as the oil price has risen to a two-year high.

This sharp improvement in its profitability could cause investor sentiment to improve dramatically. That’s especially the case since the company trades on a price-to-earnings growth (PEG) ratio of just 0.5 at the present time. This suggests that it has a wide margin of safety which could mean it is worthy of a much higher valuation. Certainly, the company’s shares could be volatile if the oil price moves lower. However, with upside potential it appears to be worth buying right now.

The post 2 cheap growth stocks with millionaire-maker potential appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens owns shares in Zytronic. The Motley Fool UK has recommended Weir. 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.

For 2017, the City expects the business to report earnings expansion of 44%. And an extra 28% rise is forecast for next year.

But scratch a little deeper and Weir becomes much less appealing. At least in my opinion.

A false dawn?

Of particular concern to me is the still-fragile state of commodities markets, even if shale producers returning to work in the US has helped lift revenues at Weir more recently. The firm noted in April that orders from oil and gas customers had leapt 50% in the year to April 26 from the same 2016 period.

While North American sales have sparked higher, progress here remains hamstrung by falling demand in the Middle East. Moreover, Weir’s declaration that “pricing levels remain depressed, with only slight improvements achieved in certain minor product lines,” adds extra concern.

And even though orders at Weir’s Minerals division have also grown more recently (these advanced 10% in the period to end-June), I believe hopes of a sustained turnaround remain built on extremely shaky foundations. Why? Oversupply in the metals and energy markets is generally worsening, potentially putting further pressure on capex budgets should earnings keep on fluctuating.

I for one would not be tempted to invest in Weir right now, particularly as the business sports a forward P/E multiple of 19.8 times. This is far too high given the prospect of biting earnings downgrades in the months ahead, and thus the potential for a crushing share price retracement.

Fragile fightback?

My pessimistic take on many bulk commodity markets also makes me concerned over the long-term growth potential of Ferrexpo (LSE: FXPO).

Helped by the resurgence of iron ore prices over the past year, the Swiss business is expected to record a 62% earnings rebound in 2017. Still, the strong likelihood of ore values continuing their recent reverse is reflected by City brokers forecasting a 37% bottom-line decline next year.

Supply strains

Although appetite for iron ore has recovered from a mild dip in recent months, fears of crushing oversupply persist as mining organisations the world over bring online their next generation of mega projects and expand their existing mines. Indeed, the boffins over at Citi expect 100m tonnes of unwanted material in 2017 thanks to these steady production increases.

Accordingly, industry analysts continue to cut their price estimates for the steelmaking ingredient in the current year and beyond. Citi for one has hacked down its prior estimates in recent days, predicting that the commodity would fall through the $50 per tonne floor before the year is up.

Sure, a prospective P/E ratio of 4.9 times certainly looks attractive on paper. But I reckon the strong possibility of painful iron price declines still makes Ferrexpo a risk too far at the current time.

The post Why I’m steering well clear of these growth stocks appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Weir. 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.

Weir announced last month that revenues dropped 2% in 2016, to £1.85bn, a result that forced pre-tax profit 22% lower to £170m. And Weir faces the prospect of further weakness as oil producers keep the pursestrings tightly closed in anticipation of depressed oil prices persisting long into the future.

This is reflected by orders last year also remaining subdued over the past year, orders falling 8% in 2016 to £1.86m.

Weir advised that it had observed “signs in our mining and oil and gas markets that point to a cyclical upturn.” But competitive pressures in fossil fuels remain significant and weak spending outside of the US casts a pall over the top line, despite a resurgent North American shale segment.

So while City brokers expect Weir to rebound from four years of earnings drops on the spin, with rises of 37% and 17% in 2017 and 2018 respectively, the company will have to see orders soar to meet current projections.

And a reversing oil price during the past month has dampened hopes of a sustained demand turnaround for Weir’s high-tech products.

So I reckon subsequent P/E ratios of 21.9 times and 17.3 times, well above the benchmark of 15 times broadly considered decent value, leave Weir’s share price in danger of slumping. And particularly so should next month’s financials (scheduled for Thursday, April 27) disappoint.

Fashion failure

I believe an increasingly-murky outlook for the UK retail sector should encourage investors to shift out of Marks & Spencer Group (LSE: MKS) in the weeks ahead, particularly as first-quarter financials (marked in for Wednesday, May 24) are likely to confirm the company’s tough outlook.

M&S has been struggling for years now to get its womenswear ranges moving off the shelves thanks to out-of-touch marketing and styling, and has been chucking shedloads of cash at its fashion teams. And the retailer’s recovery strategy is going to become even tougher to achieve as broader economic pressure mounts.

But demand for its wearable products is not the only concern as pressured household budgets could see people switch away from its high-priced edible items and into the arms of cheaper retailers, forcing M&S into reducing prices. The Food division has been its only reliable growth outlet in recent times.

The Square Mile certainly expects earnings woes to continue into the future, and a 14% decline during the 12 months to March 2016 is expected to be followed with drops of 17% and 1% this year and next.

Consequent P/E ratios of 11.6 times and 11.7 times may be attractive on paper. But with rising inflation pressuring shoppers’ appetites, and mid-tier clothiers becoming embroiled in an ever-bloodier price war, I reckon current earnings forecasts are in danger of being slashed in the months ahead, making these cheap multiples redundant.

The post 2 growth duds I’d sell in April 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 Weir. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Current projections suggest Weir will put years of significant earnings weakness to bed with a 35% bounce in 2017. And a further 26% bottom-line build is chalked-in for 2018.

But I believe these forecasts could be in line for significant revisions should Weir advise of further turbulence in its end markets. The business is due to release first-quarter results on Thursday, April 27, a development that could see the share price scuttle lower again.

The Scottish business saw its share price sink to three-month lows in late February after announcing that revenues sank 2% during 2016, to £1.8bn, or 11% at constant currencies. And this forced Weir’s reported pre-tax profit to slump by almost a quarter year-on-year, to £170m.

In brighter news Weir advised that orders ticked 10% higher during October-December, the company noting that “mining and oil and gas markets showed signs of recovery” in the period.

Still, overall conditions remain difficult and Weir predicted “further modest reductions in overall mining capital expenditure in 2017.”

And while North American fossil fuel producers have vowed to increase exploration and production spending should oil and gas prices remain stable, the firm warned that “the pricing environment is expected to remain challenging.” And the market recovery in international markets is expected to be slower, Weir advised.

I do not believe these troubles are currently baked into Weir’s share price, with current growth projections resulting in a P/E ratio of 23.3 times. I believe the company still carries far too much risk for cautious investors.

Money trap?

The prospect of significant price reversals in Anglo American’s (LSE: AAL) key markets — and in particular iron ore — in the months ahead could see the company’s share price experience a sharp pullback, in my opinion.

The Australian Department of Industry, Innovation and Science has predicted that values of the steelmaking material will slump to an average of $51.60 a tonne this year, before falling to $46.70 next year. Iron ore was still trading above $90 this week.

While iron ore imports into China remain strong, with shipments leaping 12% year-on-year in January to 92m tonnes, sizeable port-held stockpiles suggest inbound traffic could moderate in the not-too-distant future.

The number crunchers expect Anglo American to follow last year’s earnings bounce-back with an additional 34% rise in 2017.

However, expectations that Anglo American’s bottom line will drop again in 2018, by 29%, underlines fears of rocketing iron ore supply as well as moderating demand.

Many contrarian investors will no doubt be tempted in by the mining giant’s ultra-low prospective P/E ratio of 7.1 times. But I for one reckon Anglo American’s long-term outlook remains too patchy for shrewd stock pickers to pile-in right now.

The post 2 growth stocks I’d sell in March 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 Weir. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.