Do today’s updates make IGAS Energy plc, Telecom Plus plc and Go-Ahead Group plc ‘screaming buys’?

Should you pile into these three stocks? IGAS Energy plc (LON: IGAS), Telecom Plus plc (LON: TEP) and Go-Ahead Group plc (LON: GOG).

| 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.

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.

Shares in public transport operator Go-Ahead (LSE: GOG) have slumped by 14% today following the release of a pre-close trading update for the year to 2 July. While the company has kept its expectations for the year as a whole unchanged, Go-Ahead has revised its outlook for the Govia Thameslink Railway (GTR).

Notably, the additional resources being invested in GTR to support service delivery are depressing margins on that contract in the current year, with them set to impact next year’s margins too. Although Go-Ahead expects margins to improve in the long run, it no longer expects to recover the profit shortfalls and therefore margins are due to be 1.5% over the life of the contract, rather than the 3% that was previously expected.

Looking ahead, Go-Ahead is forecast to increase its bottom line by 18% in the next financial year, which would represent an excellent overall result. And with its shares trading on a price-to-earnings growth (PEG) ratio of 0.7, they seem to offer a highly appealing risk/reward ratio so that while further share price falls can’t be ruled out in the short run, longer term, Go-Ahead looks set to deliver strong share price gains.

Upside on offer

Also reporting today was Telecom Plus (LSE: TEP), with the multi-utility provider recording in-line performance for the year to 31 March. Sales increased by 2.1% versus the prior year, while adjusted earnings growth of 7% allowed the company to raise dividends by 15%. This puts Telecom Plus on a dividend yield of 4.7% and with dividends being covered over 1.2 times by profit, further growth could be on the cards over the medium term.

Looking ahead, Telecom Plus is forecast to increase its bottom line by 7% in the current year and by a further 12% next year. Given the challenging trading conditions within the domestic energy market, this would represent an encouraging result. And with Telecom Plus trading on a price-to-earnings growth (PEG) ratio of just 1.3, there seems to be considerable upside on offer over the medium-to-long term.

Furthermore, with the bundling of utilities becoming increasingly popular among consumers, Telecom Plus could become a bigger player within the utilities space and therefore has strong long-term growth appeal.

Take a closer look?

Meanwhile, shares in IGAS (LSE: IGAS) have fallen by 8% today after it released an update that stated it’s seeking to strengthen its capital position through discussions with bondholders and potential investors. For example, it has been discussing the possibility of extending the maturity of its debt, deferring certain interest payments and obtaining the waiver of some financial covenants on the basis that further finance comes into the business.

Furthermore, IGAS is also evaluating options for cash and earnings accretive transactions including farm-outs and other asset portfolio management opportunities. The goal is to achieve a capital structure that’s sustainable given the uncertain outlook for the oil and gas sector. And with IGAS now having operating costs of $30 per barrel of oil equivalent (boe) and cash of £23.6m, as well as one of the largest net shale acreage positions in the UK, it may be worth a closer look for less risk-averse investors.

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

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »