Is It Time To Sell AstraZeneca plc, Premier Oil PLC And GKN plc?

Are these 3 stocks no longer worth holding on to? AstraZeneca plc (LON: AZN), Premier Oil PLC (LON: PMO) and GKN plc (LON: GKN)

| 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.

2015 has been a rather disappointing year for investors in AstraZeneca (LSE: AZN). That’s at least partly because it’s been something of a comedown since 2014 with the company not subject to the same level of excitement regarding a potential takeover. In fact, on the M&A front it’s been rather quiet for the firm with the closing of a US tax loophole seemingly making UK domiciled stocks less appealing to their US pharmaceutical peers.

Fair price

Of course, AstraZeneca has continued to engage in its own acquisition programme that has seen its financial outlook transformed in recent years. And while positive earnings growth isn’t yet a reality and isn’t forecast to be so in 2016, over the medium term AstraZeneca is expected to become a company with an upbeat long term outlook thanks to its improved pipeline.

Furthermore, with AstraZeneca’s share price having fallen by 3% since the turn of the year, it now trades on a slightly lower valuation. In fact, it has a price-to-earnings (P/E) ratio of 15.7. For a company with a rapidly improving pipeline, a sound balance sheet, as well as the scope to make further acquisitions, that appears to be a very fair price to pay.

Ready for growth

Also having a disappointing 2015 is engineering company GKN (LSE: GKN). Its shares have fallen by 13% since the turn of the year and this is at least partly due to concerns surrounding future demand for its products from Volkswagen after the emissions scandal. And with a potential slowdown in Chinese demand for cars, investors have been rather uncertain regarding GKN’s long term future. This, plus a forecast 10% fall in earning this year, has caused investor sentiment in the stock to decline.

However, GKN is due to return to positive growth next year and while it does face a number of challenges, the reality is that demand for cars is likely to remain buoyant due to strong long term demand from emerging markets. While the Volkswagen story is definitely a setback, it’s unlikely to make a major impact on global demand for premium vehicles. As such, GKN’s P/E ratio of 11.4 holds considerable appeal.

Pain threshold

A painful 2015 was also endured by investors in Premier Oil (LSE: PMO), with the falling oil price causing a large deterioration in investor sentiment. In fact, Premier Oil’s share price has fallen by 66% since the turn of the year and it’s realistic to assume that things could easily get worse before they get better. That’s because no ceiling on supply was set at the recent Opec meeting, and with US interest rate rises on the horizon the price of oil could continue to fall during 2016.

This, of course, would hurt Premier Oil’s profitability and could lead to further writedowns in the value of its asset base. However, with it now trading on a price-to-book value (P/B) ratio of just 0.35, it appears as though more pain is already priced in. As such, Premier Oil appears to be worth holding onto at the present time.

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 owns shares of AstraZeneca. The Motley Fool UK owns shares of GKN. The Motley Fool UK has recommended AstraZeneca. 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 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »