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Amec Foster Wheeler PLC Is My Top Growth Pick For 2015

Amec Foster Wheeler PLC (LSE: AMFW) (NYSE: AMFW) is a victim of the oil price rout. The company’s shares have plunged to a three-year low, following an aggressive sell-off in oil sector stocks. 

However, this has presented a great opportunity as now, Amec is extremely undervalued and there are a number of catalysts that could drive the company’s shares higher during 2015. So, here’s why Amec is my growth pick for 2015.

A rough year 

Amec has had a rough year. For the six months to June revenues dipped by 7%, from nearly £2bn to £1.85bn. Pre-tax profits fell around 30% from £118m to £83m. 

Management attributed this poor performance to currency headwinds, as well as the winding down of work on Canadian oil sands projects. Indeed, a strong pound reduced Amec’s order book growth to only 7% for the period, compared to 16% in constant currency. Most of Amec’s business is done in dollars, so the company is particularly susceptible to the dollar-sterling exchange rate. 

Still, Amec’s services are in demand and this is likely to continue despite the falling oil price. Specifically, Amec is not a pure oil and gas contractor the company is well diversified and has been branching out, away from greenfield upstream oil and gas markets, for some time.

Instead, Amec has been concentrating on the clean energy market and Middle Eastern Oil and Gas. Clean energy is the company’s fastest growing business. Amec also operates in the mining, nuclear power and infrastructure sectors.

Transformational deal 

All in all, Amec has a strong existing business model but the company’s acquisition of Foster Wheeler, which has only just been completed, is the real reason why I believe the company is set for growth during 2015. 

You see, the market has quickly written off this deal, despite the synergies and additional business it will generate for the company. 

Amec paid $3.3bn in cash and stock for Foster Wheeler, a global engineering conglomerate, which provides construction services, energy equipment, and environmental services to the petroleum, chemical, petrochemical, pharmaceutical, power markets — a well-diversified business. 

The merged entity is set to earn 95.9p per share during 2015, on revenues of £6.2bn. At present levels, this means that Amec is trading at a lowly forward P/E of 8.8. Moreover, Amec’s shares currently support a dividend yield of around 5%. The payout is covered twice by earnings per share. 

And even after Amec’s multi-billion dollar acquisition of Foster Wheeler, Amec is still on the hunt for bolt-on acquisitions that can bolster the company’s growth. Within the last week the group has acquired Scopus Group, a market-leading laser scanning, dimensional control and lean engineering company. 

Foolish summary 

Overall, Amec has been oversold and investors have failed to realise the company’s full potential. That’s why the group is the perfect growth pick for 2015.

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Rupert Hargreaves 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.