Why I Would Buy Globo Plc But Sell Premier Oil PLC And Oxford Instruments plc

Today I am looking at three of the biggest movers in start-of-week business.


Shares in Globo (LSE: GBO) have received a bounce in Monday trade and are currently up 4.8% on the day. The software business has gained on the back of a buoyant full-year update which revealed group revenues surge 48% to €106m in 2014, while sales for its GO!Enterprise platform careered 90% higher to €57m.

The company is aggressively expanding into the US to boost its customer base and enhance its global brand, enhanced by the recent revamp of its direct sales model in the territory. Globo already counts Intel and TNT amongst its blue-chip clients, and announced in January that it had sold 50,000 GO!Enterprise licences to a Fortune 100 company in a deal worth $1.2m on an annual, renewable basis.

Globo has long been a magnet for those seeking dependable, breakneck earnings growth, and City analysts do not expect to see this trend cease any time soon. Indeed, expansion to the tune of 25% and 20% is expected in 2015 and 2016 respectively.

These numbers leave the business dealing on P/E multiples of just 5.2 times and 4.4 times forward earnings for these years, far below the yardstick of 10 times or under which represents stunning value for money.

Premier Oil

While doubts persist over the direction of the oil price, investor sentiment towards fossil fuel specialists across the globe are likely to remain locked in a heavy downtrend. Still, shares in oil play Premier Oil (LSE: PMO) — which have collapsed by more than half since Brent’s 2014 top of $115 per barrel back in June — are bucking the trend today and trading 7.9% higher.

It is true that the company’s vast capital buffer makes it a more secure pick than many of the world’s oil explorers — cash and undrawn facilities stood at $1.9bn, Premier Oil announced this month. But ongoing weakness in the black gold price has cast doubt over the earnings outlook of the firm, particularly as the business commented late last year that new projects would only be commissioned with oil around $85, a price which many believe may not ever be revisited.

As a result the number crunchers expect Premier Oil to follow a 10% earnings decline for 2014 with a colossal 54% drop in 2015, not helped by rising costs at its North Sea operations. And the bottom line is expected to stagnate in 2016, even as production at its Vietnamese and Indonesian assets rises.

So although the business currently deals on P/E multiples of just 10.3 times for 2015 and 10.6 times for next year, I believe that the likelihood of further earnings downgrades means that Premier Oil is a poor selection for risk-averse investors.

Oxford Instruments

Shares in Oxford Instruments (LSE: OXIG) continue to be battered, the firm having shed more than a third since late-January’s worrying trading update and 6.5% in Monday trading alone.

The company — which provides components and services for the medical industry — advised that the effects of Russian sanctions are likely to result in the cancellation of a significant number of orders both this year and next. And with previous expectations of a revival in Japan having failed to materialise, Oxford Instruments predicts that profit before tax will slip to £35m for the 12 months concluding March 2015, down from £47.1m in fiscal 2014.

The City now expects Oxford Instruments to record a heavy 25% earnings drop for 2015, although a solid 16% bounceback is pencilled in for next year.

Consequently Oxford Instruments changes hands on a P/E multiple of 15.8 times for this year, just above the benchmark of 15 times which represents attractive value for money, although next year’s anticipated bounceback pushes this to a more appetising 13 times. But considering the heavy weakness in its key end markets, I believe that expectations of a robust recovery are built on shaky ground.

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Royston Wild 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.