The Motley Fool

Is It Time For A Fresh Look At Petrofac Limited, N Brown Group plc And Royal Bank of Scotland Group plc?

Paying the right price for your shares is essential if you want to beat the market. The three companies I look at in this article have all delivered losses for shareholders over the last 6-12 months.

However, all three are now showing signs of a possible turnaround. Could today be a good time to buy?


Oil services provider Petrofac (LSE: PFC) announced this morning that it had secured $400m of repeat business, operating and maintaining offshore platforms in the North Sea.

Although this is good news, I suspect that Petrofac will have been forced to renew these contracts at lower rates than before, given the pressure to cut spending in the oil sector.

This could affect Petrofac’s profit margins, depending on how much of these cuts it is able to pass on to its own contractors and suppliers.

Consensus estimates for Petrofac’s full-year profits have fallen by 29% over the last three months, but have remained largely flat during the last month. This suggests to me that City analysts are now more comfortable with their expectations for 2015.

We’ll know more when Petrofac reports interim results in August, but at the moment the firm’s shares are trading on a 2015 forecast P/E of 14.2, with a prospective yield of 4.6%.

For long-term investors, I reckon now could be a reasonable time to top up with Petrofac shares.

N Brown Group

Another firm that’s already been forced to issue a profit warning this year is clothing retailer N Brown Group (LSE: BWNG).

The firm’s shares remain 15% lower than at the time of its March profit warning, when Brown Group admitted that it was having to cut prices to maintain sales.

However, today’s first-quarter trading update looks more positive. Like-for-like sales are up by 1.5% and full-year guidance is confirmed.

My only reservation is that the firm said that full-year results would be “more significantly H2 weighted than usual”. When companies say this, it usually means H1 results are going to be bad, but they’re hoping to make up for it later this year.

Needless to say, it doesn’t always work out this way. A profit warning could follow later this year. With this risk in mind, I think there are better buys elsewhere in the retail sector.

Royal Bank of Scotland

Royal Bank of Scotland Group (LSE: RBS) (NYSE: RBS.US) shares are currently plumbing new depths and have fallen by 11% so far this year.

This week’s computer problems are just the latest in a long line of very public problems for the bank.

However, there may be light at the end of the tunnel. The government is now preparing to start selling its £32bn stake in RBS. The first stake is expected to be sold during the second half of this year.

Although disposing of the taxpayer’s 80% stake in RBS is expected to take several years, I believe that it is likely to accelerate the bank’s recovery, as we’ve seen with Lloyds Banking Group.

Current forecasts are for RBS to pay a dividend of 7.1p in 2016, giving a prospective yield of 2%. Trading at a 20% discount to tangible asset value and on 12 times forecast earnings, I believe the shares could now be a good long-term buy.

After all, buying shares in well-run, dividend-paying companies is one of the best ways to beat the market.

If you'd like some more suggestions for top quality dividend stocks that could help to boost your returns, I urge you to look at "5 Shares To Retire On".

This exclusive Motley Fool FREE report contains details of five companies with outstanding dividend growth records.

To download your free, no-obligation copy of this report today, just click here now.

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Petrofac. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.