Should You Buy Friday Newsmakers Petrofac Limited, Marshalls plc & Cambian Group PLC?

Royston Wild runs the rule over Petrofac Limited (LON: PFC), Marshalls plc (LON: MSLH) and Cambian Group PLC (LON: CMBN).

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Today I am examining three stocks that dominated Friday’s financial pages.

Paving the way for plump returns

Landscaping play Marshalls (LSE: MSLH) has emerged as one of the FTSE’s strongest performers in end-of-week trading, after releasing excellent full-year financials.

The company was last dealing 11% higher following news that revenues advanced 8% in 2015, to £382.6m, a result that helped propel pre-tax profit 57% higher to £35.3m. As a consequence Marshalls hiked the full-year dividend by almost a fifth, to 4.75p per share, and agreed to pay a 2p special dividend.

On top of this, Marshalls advised that the strength of the construction sector has underpinned a strong start to 2016 — orders are currently up 6% year-on-year despite tough comparatives.

The City expects Marshalls to enjoy earnings advances of 25% and 16% in 2016 and 2017 respectively, meaning a P/E rating of 16.5 times for this year, falling to just 13.8 times for 2017. I reckon this is exceptional value given the firm’s strong upward momentum.

Financial fevers?

Shares in health services provider Cambian Group (LSE: CMBN) collapsed on Friday, following the publication of a disastrous market update. The stock was last dealing 15% lower from the previous close.

Cambian advised that “it is likely that, in light of the ongoing finalisation of costs and the completion of its audit in respect of [fiscal 2015], results for the year will be slightly lower than previous guidance.”

As a result Cambian has breached financial covenants on its loans, it said, although the firm has been granted a temporary waiver while it enters into discussions with lenders. The firm hopes to conclude these talks before its full-year results announcement, scheduled for late April.

With Cambian having already warned of problems in its cost management processes — an issue that is expected to have “significantly impacted the second half of the year” — I believe investors should steer well clear until the picture becomes clearer.

Jumbo contract news

Oil services provider Petrofac (LSE: PFC) furnished the market with news of a massive contract win in Friday trade, although investors have refused to pile in and the stock was last 1.5% lower on the day.

Petrofac announced it had won a five-year, $250m contract to act as duty holder to support Anasuria Operating Company, a joint venture between Hibiscus and Ping Petroleum in the North Sea. The services play “will assume responsibility for the FPSO operations as well as for monitoring and managing the pipelines and wells with the exception of the Cook well,” it announced.

Of course new contract wins should be cause for fanfare. But despite today’s developments, I believe Petrofac remains a risk too far for investors, as the prospect of prolonged crude price weakness could lead to further project scalebacks across the oil and gas industries.

It could be argued that Petrofac’s P/E rating of 11 times for 2016 — based on predicted earnings of 128 US cents per share — reflects the company’s high risk profile. But I believe the potential for colossal bottom-line downgrades still renders the services giant an unattractive growth pick.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. The Motley Fool UK has recommended Marshalls. 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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