Should I Buy These Shares? Polymetal International plc, Rexam plc, Croda International plc, Carnival plc And Petrofac plc

Harvey Jones takes a second look at Polymetal International plc (LON: POLY), Rexam plc (LSE: REX), Croda International plc (LON: CRDA), Carnival plc (LON: CCL) and Petrofac plc (LON: PFC).

| 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.

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.

I’ve been popping stocks into my shopping basket in recent weeks and it’s time I took one or two to the checkout. Here are five tempting stocks from April. Should I buy any of them?

Polymetal International

I’ll say one thing about Russian companies, they’re never boring. Russian gold and silver producer Polymetal International (LSE: POLY) may have listed on the FTSE 100 in 2011, but its heart still belongs to the wild wild east. Its share price is down 42% over the past six months, against a 6% rise in the FTSE 100, but it’s up 30% over the last month. Its exposure to volatile commodity and gold prices is largely to blame, and company costs are a concern. Polymetal now trades at 9.6 times earnings, against 13.2 times in April. That makes it notably cheaper than the FTSE 100 average of 13.76 times earnings. Forecast earnings per share (EPS) growth is 30% this calendar year, which puts the yield on a forecast 4.2%, so there is income to be had as well. If you are willing to take a gamble, POLY could be worth a punt.

Rexam

If Polymetal is one of the death or glory boys of the FTSE, Rexam (LSE: REX) is one of its unsung heroes. It makes its money from manufacturing beverage cans, which isn’t glamorous, but brings in plenty of tin. Or so I thought. In June Rexam shocked the market by issuing a profit warning, announcing a “challenging” first half as beverage can volume growth began the year more slowly than planned. First-half operating performance was down, and the company warned that full-year performance will be “modestly lower than previously anticipated”. Chairman Stuart Chambers took the opportunity to invest £46,000 in his own shares. Should you follow his example? The share price has stabilised since that shock, but given its worries, Rexam looks pricey at 13.7 times earnings, with a humdrum 3.1% yield. Forecast EPS growth of 10% this calendar year and 9% next looks healthy enough, and Deutsche Bank has it as a buy, with a target price of £5.50 (today’s price: £4.89). But there must be cannier investments out there.

Croda International

Chemicals company Croda International (LSE: CRDA) only joined the FTSE 100 in March 2012, at which point its previously stellar share price growth stopped. After rising a stratospheric 303% in five years, it has managed 3% in the past 12 months. So is the chemicals romance over? Maybe not, given that it has just posted a 6% increase in first-half profits and lifted its dividend by 8.4%. Croda is struggling in Europe, but like so many FTSE 100 companies, it is pinning its prospects on emerging markets. Valued at 18.8 times earnings, Croda looks expensive given modest EPS forecasts of 4% this year and 9% in 2014. The yield is a measly 2.2%. This is still a strong business, with 24.3% operating margins and ROCE of 56.4%. Goldman Sachs has it as a conviction buy with a target of £32 (today’s price: £24), but I’m less convinced.

Carnival

Every time I think about Carnival (LSE: CCL), I picture a capsized liner, which is hardly the ideal brand image for the world’s largest cruise business. The Costa Concordia disaster, which killed 32 people in January 2012, and three further liner incidents in 2013, have weighed on the share price. Drifting onto the rocks of reputational ruin isn’t the only problem, sales have been slow in Europe, although growth prospects in the Chinese and Japanese cruise markets are buoyant. Second-quarter results, published in June, were better than expected, with reported profits hitting $41 million, up from $14 million last year. Revenues held steady at £3.5 billion. I’m impressed by management’s drive to reduce Carnival’s exposure to fuel prices, cutting consumption by 23% since 2005. But trading at more than 20 times earnings, it still looks too choppy for me.

Petrofac

I thought oilfield service company Petrofac (LSE: PCF) looked a buy in April, but June proved me wrong. Its share price slumped after management forecast only “modest growth” this year, with results “significantly weighted towards the second half”. To add to the uncertainty, president and executive director Maroun Semaan, who joined the company in 1991, has just said he will retire at the end of the year. Petrofac is also exposed to upheaval in the Middle East and North Africa, of which there has been plenty lately. Despite this, the business still looks strong. It has a hefty $11.9 million order backlog and is on course to more than double 2010 group profits by 2015. And it is winning new business, including a $50 million three-year operations and maintenance contract in June for Oman Oil Company Exploration and Production. A 24% drop in the share price in the last six months leaves it at a tempting 10.9 times earnings. The dividend is a modest 3.2%, but forecast EPS growth looks pretty slick at 4% this calendar year and 16% in 2014. Petrofac still looks like a buy to me.

There are more exciting growth opportunities out there. Motley Fool analysts have found what they believe is the single best UK growth stock of this year. That’s why they have named it Motley Fool’s Top Growth Share For 2013. To find out more, download our free report. It won’t cost you a penny, so click here now.

> Harvey doesn’t own any of the shares mentioned in this article. The Motley Fool has recommended shares in Petrofac.

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.

More on Investing Articles

Young Black man sat in front of laptop while wearing headphones
Investing Articles

Which of these is the best dirt cheap FTSE 100 stock to buy for 2024?

I'm building a list of the greatest FTSE 100 stocks to buy for the long term. But are these UK…

Read more »

Investing Articles

What’s on the cards for the BT share price in 2024?

After a turbulent few years, could the BT share price experience a better year ahead and how? This Fool investigates.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Lloyds shares could reach £1.50 in 2024

Lloyds shares rising from 43p to £1.50 in 2024 sounds like a tall order, but here is how the unloved…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

Should investors rush to buy Aviva shares before the end of the year?

The 7.5% dividend yield on Aviva shares is attractive. But Stephen Wright thinks a different FTSE 100 insurer is a…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 UK stocks for value investors to consider buying before the end of the year

Exploiting cyclical downturns can be a great way for value investors to find stocks to buy at bargain prices. Stephen…

Read more »

Young woman holding up three fingers
Investing Articles

I’d earn £1,260 in passive income by investing a £20k Isa in these 3 ultra-high-yield stocks

I'm on the hunt for passive income and I reckon the following FTSE 100 stocks should help me generate it…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Could these beleaguered FTSE 100 stocks stage a turnaround?

Could these FTSE 100 stocks be primed for recovery after difficult times? Sumayya Mansoor takes a look at what could…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Is this FTSE 100 giant one of the best income stocks out there?

Our writer takes a closer look at this medical business as a potential income stock for her portfolio, even though…

Read more »