Think the 88 Energy share price is a bargain? Read this now

88 Energy Ltd (LON: 88E) could have an uncertain future but may be of interest to less risk-averse investors seeking a possible turnaround.

| 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.

Buying a share which has fallen in price can sometimes be a shrewd move. It may provide a wider margin of safety than it otherwise would, and this can help to place the investment odds further in an investor’s favour.

However, on some occasions, a company’s share price may have fallen for a good reason. 88 Energy (LSE: 88E) may be one such example, with the stock’s market valuation having declined by 64% in less than four months. The company has endured a disappointing period, with its outlook relatively uncertain.

Challenging prospects

As with any oil and gas exploration company, 88 Energy has required significant sums of investment in order to make progress with its strategy. It recently launched a rights issue as it seeks to boost its financial resources ahead of further exploration activities. One of the problems facing the company, though, is the challenge of turning its potential into revenue and profitability. Flow tests have generally been disappointing, with the accessibility of potential reserves a key issue for the business.

Investors, it seems, are becoming increasingly uncertain about the company’s prospects. Alongside the recent downturn in the wider resources industry, this could mean that the 88 Energy share price remains weak in the near term. Investors seem to be increasingly ‘risk-off’, which could push them towards larger, more diversified and financially-stable businesses in the FTSE 350.

Clearly, the stock has the potential to recover. But given the challenges it has faced, it may only prove to be of interest to less risk-averse investors. Even though its rewards could be high, the near-term risks facing the business continue to be significant.

Improving outlook

As mentioned, some share price falls can create more appealing investment opportunities. One company that could offer an improving share price outlook is Hargreaves Services (LSE: HSP). The diversified company, which provides services to the industrial and property sectors, released a trading update on Tuesday to coincide with its AGM.

The business is on track to deliver on its revised expectations. It has completed the sale of Brockwell Energy, with the net funds of £15m from the deal having been applied to reduce short-term overdraft borrowings. In the current year, it’s forecast to post an improvement in earnings, with a price-to-earnings (P/E) ratio of 13.5 suggesting that it could offer good value for money.

Clearly, the fall in Hargreaves Services’ share price of around 8% in the last year is relatively disappointing. The company has experienced a turbulent period, with one of its customers, Wolf Minerals, having ceased trading. The company, though, appears to be performing relatively well and has the potential to deliver a stronger financial performance in future.

While potentially risky and volatile, the stock could offer a margin of safety. Therefore, for less risk-averse investors who are seeking a possible turnaround stock, it may be of interest over an extended time period.

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 of the 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.

More on Investing Articles

Investing Articles

Is the Centrica share price a compelling value play?

I'm always on the lookout for investments that might be undervalued, but is the Centrica share price as cheap as…

Read more »

Investing Articles

Down 88% since its peak! Is this one of the best UK shares to buy now?

I see lots of potential shares to buy on the UK stock market right now, but I don't see explosive…

Read more »

Investing Articles

Should investors be looking at the Barclays share price?

The Barclays share price has been in rally mode lately, but is the best still to come for new investors?…

Read more »

Investing Articles

Here’s what Stocks & Shares ISA investors are buying today!

ISA investors are piling into these UK and US stocks. But which could be the best buy right now? Royston…

Read more »

Investing Articles

2 powerful passive income stocks investors should consider snapping up

Building a passive income stream via dividend-paying stocks is possible, according to our writer, who details two picks to take…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing For Beginners

This UK stock has gained 42% since I bought it, but I think it’s still a bargain

Jon Smith outlines his reasons for thinking that a UK stock he owns has the potential to keep rallying for…

Read more »

Investing Articles

1 under-the-radar value stock I’m eyeing up for returns and growth

This Fool is looking for quality stocks at bargain prices and reckons this potentially overlooked value stock could be a…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

National Grid shares have plunged — but if I’d bought 2 years ago, would I be in profit?

National Grid shares are about 22% lower than in May, but that may just be a small blip for long-term…

Read more »