Why AO World PLC And Tungsten Corp PLC Surged 10%+ Today!

These 2 stocks are among today’s biggest risers: AO World PLC (LON: AO) and Tungsten Corp PLC (LON: TUNG)

| 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.

Life as an investor in electrical appliances company AO World (LSE: AO) and e-invoicing specialist Tungsten (LSE: TUNG) has been rather challenging in 2015. That’s because both companies have suffered from declining investor sentiment that has caused their share prices to slump by 53% and 68% respectively since the turn of the year.

However, prior to today those figures were even worse, since the share prices of both companies are up by 10% since the market opened this morning. Could this be an opportune moment to buy ahead of further improvements to investor sentiment?

In the case of AO World, my answer is ‘yes’. That’s because the company has released an upbeat trading update, with sales being up 11.2% in the three months to the end of June. This is a welcome result for investors in the stock, since AO World had disappointed in the recent past in terms of its financial performance but, with its long-term strategy seemingly back on track, it should be able to deliver improved performance over the medium to long term.

In fact, with European expansion set to be a feature of the next few years, now could be a good time to buy a slice of AO World. And, with disposable incomes in the UK rising at a faster rate than inflation for the first time in a number of years, spending on domestic appliances is likely to increase moving forward. As such, AO World is expected to return to profitability on a per-share basis in the current year, before delivering exceptional growth next year. As such, it trades on a price to earnings growth (PEG) ratio of just 0.6, which indicates that its shares offer growth at a very reasonable price.

Furthermore, AO World is continuing to build its brand and has reported an improvement in repeat orders. This could help to differentiate it from its rivals and, with domestic appliance sales being a highly competitive industry, could allow AO World to report higher than average margins in the long run, which would clearly be positive for its investors.

Meanwhile, Tungsten is also at the beginning of a period of potentially improved performance. A recent placing has strengthened its balance sheet and, while it is expected to remain loss-making in the current year and next year, the company’s pre-tax loss is forecast to narrow from £30m last year to around £5m in financial year 2017. And, with Tungsten’s management team remaining confident regarding the potential to grow the company’s top and bottom lines in the long run, investor sentiment could continue to strengthen over the medium term.

However, with the company remaining in the red, now may not be the perfect time to buy a slice of the business. Certainly, it has great potential, but expectations remain rather high and, should there be further challenges ahead then Tungsten’s share price could come under further pressure. As such, it may be prudent to wait for further evidence of the company’s successful march towards profitability before adding it to a Foolish portfolio.

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

Investing Articles

5 FTSE 100 shares to consider buying for passive income right now

The FTSE 100 is having its best start to the year for ages, and that's pushing the top dividend yields…

Read more »

Investing Articles

One overlooked cheap share to tap into the year’s hottest theme?

This Fool describes the key things to think about when investing in copper stocks and analyses one cheap share to…

Read more »

Investing Articles

A cheap FTSE 100 stock that’s ready for a dividend hike in 2024

This banking giant is one of the FTSE 100's greatest dividend stocks. And at current prices, our writer Royston Wild…

Read more »

Growth Shares

Is the BP share price set to soar after Michael Burry invests in the firm?

Jon Smith takes note of a recent purchase from the famous investor behind The Big Short and explains his view…

Read more »

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

I’d focus on Kingfisher now after the Q1 report leaves the share price unmoved

With the share price near 262p, is the FTSE 100’s Kingfisher a decent investment now for dividends and business recovery?

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£500 buys me 493 shares in this 7.4% yielding dividend stock!

The renewable energy sector remains out of favour. As a result, there are some high-yielders around, including this dividend stock.

Read more »

Road trip. Father and son travelling together by car
Investing Articles

If I’d put £10k into Tesla stock 2 years ago, here’s what I’d have now

Tesla stock has fallen in the past few years. But the valuation looks temptingly low now, as we approach a…

Read more »

Google office headquarters
Investing Articles

Up 41.5% in a year, here’s why Alphabet is one of my top stocks to buy

Our author thinks Alphabet is one of the best stocks to buy. He says its undervalued, highly profitable and has…

Read more »