How high can FTSE 100-member BP’s share price go?

Will BP plc (LON: BP) continue to outperform the FTSE 100 (INDEXFTSE:UKX)?

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The BP (LSE: BP) share price has risen by 20% in the last year, with the prospects for the FTSE 100 oil and gas giant seemingly brighter than they have been in almost a decade. Indeed, the company is now delivering high returns for investors after experiencing difficulties such as a low oil price and the 2010 oil spill.

Looking ahead, further outperformance of the FTSE 100 could be ahead. As such, now could be the right time to buy into the BP share price alongside another cheap stock which reported positive results on Monday.

Bright future

The company in question is designer, manufacturer and distributor of innovative flooring Victoria (LSE: VCP). The company released an upbeat trading update for the five months to the end of August, with like-for-like (LFL) revenue rising by more than 3%. It’s been able to use competitive product positioning to drive volume and market share growth in the UK, with new product ranges across the company set to be launched during the second half of the year.

With the recent acquisition of Ceramica Saloni performing as expected and synergies being delivered, the prospects for the company appear to be encouraging. It’s working on further acquisitions which could help it to deliver further growth over the medium term.

Despite its strong performance and improving outlook, Victoria trades on a price-to-earnings growth (PEG) ratio of just 1.2. It has a robust outlook, with double-digit earnings growth expected in the current year and next year. As such, now could be the right time to buy it.

Improving prospects

The BP share price could also deliver high capital returns in future. The company’s financial performance has already been boosted by a higher oil price, and further growth could be ahead. The company has invested in new projects in recent quarters, while also engaging in M&A activity following the purchase of BHP Billiton’s petroleum business unit. Forecasts for the oil price remain encouraging, with demand expected to remain robust and supply continuing to lag behind due to political risks among various OPEC members.

With BP’s asset base and balance sheet steadily improving as the oil price has moved higher, the prospects for the company’s Downstream and Upstream operations seem to be encouraging. Its recent updates have shown that both segments could enjoy an improved financial and operational outlook, and this could have a positive impact on the company’s share price.

With BP forecast to post a rise in earnings of 11% in the next financial year, it trades on a PEG ratio of 1.1. For a FTSE 100 major with a diversified asset base and a dividend yield of over 5% to have such a low valuation suggests that it could offer significant investment appeal. As such, now could be the right time to buy it ahead of what may prove to be a purple patch for the oil price and the wider oil and gas industry.

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 owns shares of BP. 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.

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