Is the Premier Oil share price a bargain, or should I buy this FTSE 250 turnaround share?

Could this FTSE 250 (INDEXFTSE:MCX) stock outperform Premier Oil plc (LON: PMO)?

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With the Premier Oil (LSE: PMO) share price having halved since the start of October, the company is clearly experiencing a difficult period. This has been prompted by a falling oil price, with Brent declining by $26 over the same time period, to trade at around $60. Further falls cannot be ruled out in the short run, since confidence in the oil and gas sector is at a low ebb at the present time.

Having declined by such a large amount, the Premier Oil share price now seems to offer a low valuation. Could it be worth buying? Or, does another potential turnaround stock, which released an update on Tuesday, offer stronger investment prospects?

Growth potential

The company in question is international healthcare services provider UDG Healthcare (LSE: UDG). It released full-year results, with revenue rising by 5% on a constant currency basis to $1,315.2m. Profit, before tax, gained 15% to $138.8m on an adjusted basis, while adjusted earnings per share increased by 22%.

The company’s two global platforms, Ashfield and Sharp, continued to drive earnings as the business sought to strengthen its market position. Ashfield’s additions of Create NYC and SmartAnalyst could help to broaden its capabilities, while the improving performance of Sharp US in the second half of the year may lead to stronger performance in the new financial year.

With UDG Healthcare forecast to post earnings growth of 9% in the current year, its strategy of delivering organic growth, plus further acquisitions, seems to be working well. Following a share price fall of 33% in the last year, the stock’s price-to-earnings (P/E) ratio of 15.5 seems to offer investment potential for the long term.

Uncertain outlook

As mentioned, further falls in the oil price may be ahead. Investor sentiment has changed rapidly after a period of strong growth. Although a level of $60 per barrel is not especially low, there had been hopes for oil to reach $100 over the medium term among some investors. With supply disruption expected due to sanctions from Iran, and geopolitical risks elsewhere, investors seemed to have priced in continued growth across the oil and gas sector.

Therefore, with investors now apparently unsure about the prospects for the industry, Premier Oil could offer a favourable risk/reward ratio. Certainly, it could post further share price falls in the near term, but its operational performance seems to be sound. It’s in the process of ramping-up production, while maintaining a disciplined approach to costs. This could allow it to reduce debt and may lead to a stronger business over the coming years.

As such, with the stock having a forward P/E ratio of around 5, it could offer a wide margin of safety. For investors who are less risk-averse, and are focused on the long term, it may provide turnaround potential over an extended time period, in my opinion.

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.

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