Are Petropavlovsk plc, Schroders plc and Avocet Mining plc worth buying after today’s updates?

Do these 3 stocks offer appealing risk/reward ratios? Petropavlovsk plc (LON: POG), Schroders plc (LON: SDR) and Avocet Mining plc (LON: AVM)

| 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.

Positioned well for future growth

Today’s interim management statement from asset manager Schroders (LSE: SDR) shows that the company is making encouraging progress in an uncertain market. It was able to increase assets under management from £313.5bn to £324.9bn, with that figure being boosted by net inflows of £2.7bn, as well as investment returns of £8.7bn during the period.

Although pre-tax profit fell from £142m in the first three months of last year to £138m in the first quarter of the current year, Schroders’ diversified business model positions the company well for future growth even in what is likely to be an uncertain period, with the EU referendum having the potential to cause high volatility in the short run.

With Schroders forecast to increase its bottom line by 7% next year and its shares having a price to earnings (P/E) ratio of just 14.8, it seems to offer good value for money given its excellent track record of growth. Therefore, while its short term performance has the potential to disappoint, Schroders remains a sound long term buy.

A wide margin of safety

Also reporting today was gold miner Petropavlovsk (LSE: POG), which confirmed production guidance for the full-year of 460,000–500,000 ounces of gold. This would be slightly down on 2015’s production of 504,100 ounces and reflects the company’s focus on cost reduction and operational efficiencies. Still, Petropavlovsk expects to deliver a 10-20% annual rise in production between 2017 and 2020 which, when combined with a fall in costs, could mean a sustained rise in profitability over the medium to long term.

As well as a production update, Petropavlovsk also announced the acquisition of Amur Zoloto, a Russian gold mining company, for $144m. It will be paid for out of the issuance of new shares and with Petropavlovsk also announcing a joint venture with LLC GMD Gold to finance the completion of the construction and commissioning of the company’s pressure oxidation hub project, it seems to be making strong progress.

With Petropavlovsk trading on a P/E ratio of just 4.8, it seems to offer a wide margin of safety — especially while the prospects for the gold price are so positive. Therefore, it seems to be a worthy purchase for less risk-averse investors.

Upbeat prospects

Meanwhile, shares in gold miner Avocet (LSE: AVM) have soared by over 40% today after it released a positive first quarter production update. Total gold production at Inata was 20,528 ounces at a cash cost of $925 per ounce. This is up from 17,379 ounces produced in the fourth quarter of last year, with costs falling from that quarter’s $1,094 per ounce. This rise in production and fall in costs is clearly positive news and has caused investor sentiment to rapidly rise.

Production in the first quarter benefitted from a period of treating cleaner ores, which enabled higher recoveries to be achieved. Throughput also improved, with 544k tonnes processed in the quarter versus 509k tonnes in the previous quarter. And with production from Inata in 2016 expected to be between 75,000 and 85,000 ounces, the company’s medium term prospects appear to be upbeat. Therefore, for investors with a higher tolerance of risk, Avocet could be worth a closer look.

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

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

What’s going on with the Auto Trader share price?

Paul Summers takes a closer look at why the Auto Trader share price has tumbled despite the company posting higher…

Read more »

Investing Articles

Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come.…

Read more »

Investing Articles

I’d consider this beaten-down FTSE 100 dividend stock to target a second income of £19,000

Our writer sees an opportunity to earn a substantial second income by investing in this UK insurance giant. Here’s his…

Read more »

Investing Articles

How cheap is the 72p Vodafone share price?

The Vodafone share price looks very cheap having fallen to a 72p price tag. But is it really the bargain…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Up 43% in a year and the IAG share price could keep on rising!

One of the FTSE 100’s highest-flying stocks still looks cheap on an earnings basis. Is this a brilliant buy for…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

As the BT share price slumps on H1 results, should I buy for big dividends?

Just when I thought the BT Group share price could be set for a new bullish run, the telecoms giant…

Read more »