Should You Buy Sirius Minerals PLC, Fairfx Group PLC & Circle Oil Plc Today?

Royston Wild analyses the investment case for Sirius Minerals PLC (LON: SXX), Fairfx Group PLC (LON: FFX) and Circle Oil Plc (LON: COP).

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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.

Today I am running the rule over three of the Footsie’s Friday risers.

In the money

Money transfer and currency card specialist FairFX (LSE: FFX) has continued its heady ascent of recent weeks with a 3% gain in Friday trade, the business greeting the market with robust full-year numbers for 2015.

FairFX announced that revenues leapt 35.7% higher last year, to £7.4m, although heavy marketing spend drove the firm into a pre-tax loss of £3.4m. The money play added 103,338 retail customers last year, taking the total to more than half a million.

Reassuringly FairFX added that trading during the first quarter of 2016 had been in line with expectations, and I believe the firm’s huge investment in marketing and technology — not to mention strategic focus on the retail card market — should keep delivering the goods.

FairFX is not expected to flip into the black this year, however, given that its hot growth story is still in the early stages. But the money play is expected to report its first earnings of 1.1p per share in 2017, and despite a heady P/E rating of 30.1 times I reckon FairFX could prove a lucrative selection for long-term investors.

Oilie gushing higher

Oil explorer Circle Oil (LSE: COP) also enjoyed a firm bump skywards in end-of-week trade, an 18% advance putting FairFX firmly in the shade.

Investor appetite shot higher following news that Circle Oil had agreed to suspend repayments to the International Finance Corporation under its reserve based lending facility. The payment deadline has now been pushed back to May 13th.

The stunning rise of Brent crude to four-month highs above $44 per barrel has no doubt boosted investor hopes that Circle Oil may now be past the worst.

I am not so convinced, however, and believe Circle Oil could find itself on the back foot again should ‘black gold’ prices retrace and the oil play’s fragile balance sheet find itself under the microscope again.

In a hole?

Like Circle Oil, I reckon Sirius Minerals (LSE: SXX) is also at the mercy of a colossal share price correction, thanks to the hulking supply imbalances hanging over commodity markets.

The potash producer was recently dealing 2% higher from Tuesday’s close, however, Sirius Minerals settling in recent weeks following heavy stock price volatility.

Shares shot to their highest in almost a year in March following a definitive feasibility study at its North Yorkshire polyhalite project, an asset that Sirius Minerals believes will transform the business into “a world leader in the fertilizer industry.” But news that the firm will need $3.56bn to start digging brought shares back to Earth with a bang.

While Sirius Minerals throws up plenty of potential, the firm remains a high-risk stock despite the exceptional results of recent drilling work. The digger still has to raise finance for its asset in the North, while subdued potash values puts a further fly in the ointment. And of course the unpredictable nature of minerals production also makes the Sirius Minerals a gamble too far, in my opinion.

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 considered so you should consider taking independent financial advice.

Royston Wild 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.

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