How Much Further Can Shares In Monitise Plc, Apr Energy plc and Nostrum Oil & Gas plc Fall?

Are these underperforming shares worth buying? Monitise Plc (LON:MONI), Apr Energy plc (LON:APR) and Nostrum Oil & Gas (LON:NOG).

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Today, shares in Monitise (LSE: MONI) have soared by 12% to 5.08 pence. The value of the shares in the mobile payments company are still 88% lower than a year ago, as investors have become increasingly concerned over whether the company can deliver the revenue growth it has promised and slow the rate of its cash burn.

The company, which changed its strategy from creating tailored made licences to selling a unified subscription model, has yet to secure enough new contracts for its new system. Unless its management can show that it can cut its operating costs quickly enough or show that it can deliver on revenue growth, investors and lenders may not be willing to stump up additional cash to fund its continued investments.

The selling down of its shares by major shareholders is another cause for concern. Visa Europe and US hedge fund Omega Advisors, two of its cornerstone investors seemed to have given up on the company, by aggressively selling down their stakes regardless of the company’s plummeting share price.

Competition is rife in the sector, and Monitise may lack the scale needed to compete with the likes of Apple and Google. With this in mind, shares in Monitise could have much further to fall.

APR Energy

APR Energy (LSE: APR), the temporary power provider, has struggled to secure new contracts despite surging demand for temporary power solutions globally. The company is overly exposed to a single contract to provide power to 1 million homes in Libya, which accounts for about 60% of its underlying profits. But, costs for the contract have spiralled out of control, and the company’s level of indebtedness has been soaring.

With net debt of $557 million, the company is dangerously close to breaching its debt covenants. Unless the company can show that it can grow revenues and cut costs quickly enough, APR could find itself in serious financial trouble.

Nostrum Oil & Gas

Shares in Nostrum Oil & Gas (LSE: NOG) may have fallen by 32% over the past year, but it seems that its shares could fall much further. The oil price has fallen much further, with the price of Brent crude oil having dropped 52% to $50.50 per barrel over the same period.

There are bright spots for the Kazakhstan-focused oil producer though. Its GTU3 well development is fully funded, and the completion of this well should allow its production rate to more than double from currently less than 45,000 barrels of oil equivalent per day (boepd), to 100,000 boepd by the end of 2016. Nostrum’s pre-Caspian Basin oil fields also benefit from very low production costs, with an average cost of production of just $4.3 per barrel of oil equivalent.

However, shares in Nostrum seem very pricey on its forward-looking valuations. Analysts expect underlying EPS will fall by 68% this year to 17.3 pence. With its shares currently trading at 515 pence, this implies a forward P/E ratio of 29.8. By 2016, underlying EPS is expected to bounce back by 44% to 25.0 pence, and this should mean its forward P/E on its 2016 earnings will still be a whopping 20.6.

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.

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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