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Why I Would Buy Sports Direct International Plc But Sell Plexus Holdings PLC And Enquest Plc

 Today I am looking at the investment case for three FTSE heavyweights.

Sports Direct International

I believe that sportswear outlet Sports Direct (LSE: SPD) is in terrific shape to enjoy splendid revenues growth in coming years. Not only is the firm’s stable of in-house budget brands — a portfolio which includes Slazenger, Dunlop and Karrimor — likely to remain in vogue with bargain-hunting fitness nuts at home, but the company is also stepping up its activities in Europe to boost the top line.

Sports Direct has a terrific history of delivering dependable earnings growth in recent years, and has seen the bottom expand at a compound annual growth rate of 26.9% during the past five years. And City economists do not expect this trend to cease any time soon, with anticipated growth of 16% for the year concluding April 2015 to advance a further 15% and 12% in fiscal 2016and 2017 correspondingly.

Consequently, the leisure retailer’s P/E multiple of 17.6 times predicted earnings for this year to a much-improved 15.1 times for 2016 and 13.6 times for 2017 — any reading below 15 times is broadly considered excellent value.

Plexus Holdings

Shares in oil and gas engineering services provider Plexus Holdings (LSE: POS) have enjoyed a robust bump higher in Thursday trading and were recently dealing 19% higher on the day. The company announced today that it had inked a framework agreement with fellow engineering play Yantai Jereh Oilfield Services Group, a move which Plexus hopes will eventually lead to the Chinese firm manufacturing and selling its wellhead products across Asia.

While it is true that Plexus has a strong record of generating solid, double-digit earnings growth in recent years, the bottom line is expected to rise by a much more modest 5% in the year concluding June 2015 as capex across the oil sector drops. The company is anticipated to get back in gear from next year, however, and a 44% improvement is currently pencilled in for fiscal 2016.

Still, I believe that the effect of significant investment scalebacks cutting washing across the oil market could put paid to expectations of this return to breakneck growth. And with the business trading on elevated earnings multiples of 31.2 times for this year and 21.6 times for 2016, I believe that the firm could be susceptible to a heavy price correction should its end markets remain under pressure, irrespective of today’s landmark deal.

Enquest

Shares in fossil fuel play Enquest (LSE: ENQ) have maintained their decent start to the year following last week’s full-year announcement. The business saw pre-tax profits edge 3.3% lower during 2014, to $362.5m, while it was forced to swallow more than $335m worth of impairments due to the collapse in the Brent benchmark.

However, the company vowed to keep on investing in the North Sea owing to tax breaks afforded to local producers in this month’s Budget, as well as initiating a range of cost cuts across the business to combat the subdued Brent price. However, investors should not lose sight of Enquest’s precarious balance sheet — net debt ballooned to $932.8m last year from $381.1m in 2013 — a situation which could curtail the firm’s plan to spend $600m on project development in 2015.

It is worth remembering that Enquest’s bump since the turn of 2015 bucks a trend of severe share price weakness experienced since last summer — indeed, the stock remains almost three-quarters down from the levels seen last June. And should the oil market balance continue to deteriorate, forcing the Brent price to resume its downtrend of recent months, I believe that Enquest could see its financial position come under fresh stress.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Sports Direct International. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.