Wood Group
Investors in Wood Group (LSE: WG) endured a very challenging 2014, with shares in the energy services company falling by 13% during the course of the year. However, following relatively robust results, the company has made a strong start to 2015, with its shares being up 10% since the turn of the year. And, looking ahead, there could be much more outperformance to come.
That’s because Wood Group offers a potent mix of value and income potential that could lift investor sentiment over the medium to long term. For example, it has a price to earnings (P/E) ratio of just 11.7 which, when you consider that the FTSE 100 has a P/E ratio of 16, indicates that there is scope for a significant upward rerating.
And, with Wood Group having a dividend yield of 3.1% despite paying out just 36% of profit as a dividend, it could become more in-demand as an income play – especially if, as expected, interest rates remain low for some time.
Premier Oil
It’s been a disappointing period for Premier Oil (LSE: PMO) of late, with it falling into a loss-making position and being forced to write down the value of a number of its key assets. As such, it is little surprise that its share price has fallen by 50% in the last year.
However, there could be potential for a major turnaround in Premier Oil’s share price. That’s because, while it trades on a very high valuation at the present time, its future growth potential is significant. For example, Premier Oil is expected to increase its bottom line by 62% in 2016 and, in spite of a P/E ratio of 25, this puts it on a price to earnings growth (PEG) ratio of just 0.2.
This indicates that it offers growth at a very reasonable price so, even with more asset write downs, Premier Oil could prove to be an appealing longer term buy.
Dragon Oil
Even though the price of oil has sunk dramatically in recent months, Dragon Oil (LSE: DGO) is forecast to remain profitable both in the current year and next year, too. Of course, earnings are due to fall by 52% this year but, in 2016, are expected to rebound by 58%, although clearly this would put them at a lower level than they reached last year.
Still, even with the current year’s lower earnings factored in, Dragon Oil trades on a P/E ratio of just 14.6 which, when combined with its strong growth prospects for next year, equates to a PEG ratio of just 0.3. As such, and while Dragon Oil is down by 10% in the last six months, it looks to be a company with great potential over the next few years.
