The Motley Fool

A ‘secret’ growth stock I’d buy alongside Premier Oil plc

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.

The outlook for the oil and gas industry remains highly uncertain. Although the oil price has surged higher in recent months and now stands at $60 per barrel, many investors remain cautious about investing in the sector. That’s understandable given the volatility which has been present in recent years.

However, for investors who are perhaps less risk-averse, there could be a number of strong growth opportunities within the industry. One example is Premier Oil (LSE: PMO), which is expected to deliver improving profitability over the next couple of years. However, there is another company operating within the same sector which could also offer strong share price growth potential.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Mixed performance

The company in question is production, development and exploration business Nostrum (LSE: NOG). It reported a somewhat mixed update on Tuesday which showed that while its third quarter was upbeat from a financial perspective, its operational performance was slightly disappointing. For example, it announced a delay to the GTU3 tie-in, while production continues to be behind its 2017 targets.

However, it has been able to complete a bond refinancing and implement its cost saving programme. Alongside improved oil prices, this means that it is on track to move from loss to profit in the current year. This in itself could stimulate investor sentiment and help to push its share price higher. But looking to next year, the company’s forecast rise in earnings of 148% could be the major catalyst behind its future share price performance. It trades on a price-to-earnings growth (PEG) ratio of just 0.1, which suggests that it offers a wide margin of safety for the long run.

Low valuation

Of course, Premier Oil also has investment potential at the present time. After three years of losses it is expected to move back into the black in 2017 with a pre-tax profit of £21m. Next year, that figure is forecast to rise to almost £139m as the company’s strategy of reducing costs and increasing production is set to have a positive impact on its bottom line. And with it trading on a forward price-to-earnings (P/E) ratio of just 5.3, it appears to have significant upside potential over the long run.

Uncertain outlook

Clearly, both Nostrum and Premier Oil are highly dependent on the performance of the oil price in future. While it has made strong gains in recent months, there is no guarantee that the trend will continue. Should supply increase or demand come under pressure, the price of oil could easily slip back to recent low levels.

However, with OPEC’s supply cut, exploration spend being under pressure across the industry and demand continuing to remain robust, the prospects for the industry remain relatively bright. As such, buying Nostrum and Premier Oil could be a sound move, with both stocks offering high risks but also significant potential rewards in the long run.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.