Is it too late to buy Premier Oil plc, Lonmin plc & Swallowfield plc?

Are these 3 stocks now too expensive to buy? Premier Oil plc (LON: PMO), Lonmin plc (LON: LMI) and Swallowfield plc (LON: SWL)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With Premier Oil (LSE: PMO) having risen by 46% since the start of the year, many investors may feel that it is too late to buy a slice of the oil producer. After all, the price of oil has already soared to around $50 per barrel and investor sentiment towards the wider oil sector has improved dramatically.

However, there is still considerable upside potential on offer for investors in Premier Oil. That’s because the price of oil could increase significantly in the long run as demand from the emerging world rises. Certainly, in the short run it could come under pressure but for long term investors, oil remains a very appealing industry in which to invest.

Moreover, Premier Oil still trades on a very appealing valuation even after its recent share price rise. For example, it has a price-to-book (P/B) ratio of 0.7, which indicates that capital gains are still very much on the cards in the long run and that now could be an excellent opportunity to buy.

Similarly, shares in Lonmin (LSE: LMI) have soared since the turn of the year. In fact, they have risen by a whopping 129% year-to-date, but there could be much more to come. That’s not only because there is scope for commodity prices to rise, but also because Lonmin seems to have a sound strategy through which to increase its earnings.

For example, it is seeking to reduce costs and become increasingly efficient. And with Lonmin having raised capital last year, it appears to have the financial firepower through which to deliver improved financial performance in the coming years. In fact, Lonmin is forecast to return to profitability in the next financial year, which has the potential to significantly improve investor sentiment in the stock.

Certainly, Lonmin’s forward price-to-earnings (P/E) ratio of 68 may seem to be excessively high, but when its P/B ratio of around 0.5 is factored in, there seems to be scope for further capital gains. While they may not be as impressive as those achieved in the last five months, they could still be well ahead of the wider index over the medium to long term.

Meanwhile, shares in Swallowfield (LSE: SWL) have risen by 24% today after it announced the acquisition of The Brand Architekts Limited, as well as a placing to raise £8.6m. The deal seems to be a logical one for the personal care and beauty product specialist, with Brand Architekts having the potential to bring critical mass to Swallowfield’s owned brand portfolio, as well as adding a proven management team. In addition, the deal looks set to be immediately earnings accretive and with the placing being oversubscribed, it seems popular among investors.

Clearly, after such a jump in share price many investors will feel that a pullback is on the cards. However, with Swallowfield trading on a price-to-earnings growth (PEG) ratio of just 0.3 prior to today’s update, it appears to still offer capital gain potential. And with today’s trading update being in-line with expectations, now could be a good time to buy Swallowfield.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »