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Is It Time To Sell AstraZeneca plc, Premier Oil PLC And GKN plc?

2015 has been a rather disappointing year for investors in AstraZeneca (LSE: AZN). That’s at least partly because it’s been something of a comedown since 2014 with the company not subject to the same level of excitement regarding a potential takeover. In fact, on the M&A front it’s been rather quiet for the firm with the closing of a US tax loophole seemingly making UK domiciled stocks less appealing to their US pharmaceutical peers.

Fair price

Of course, AstraZeneca has continued to engage in its own acquisition programme that has seen its financial outlook transformed in recent years. And while positive earnings growth isn’t yet a reality and isn’t forecast to be so in 2016, over the medium term AstraZeneca is expected to become a company with an upbeat long term outlook thanks to its improved pipeline.

Furthermore, with AstraZeneca’s share price having fallen by 3% since the turn of the year, it now trades on a slightly lower valuation. In fact, it has a price-to-earnings (P/E) ratio of 15.7. For a company with a rapidly improving pipeline, a sound balance sheet, as well as the scope to make further acquisitions, that appears to be a very fair price to pay.

Ready for growth

Also having a disappointing 2015 is engineering company GKN (LSE: GKN). Its shares have fallen by 13% since the turn of the year and this is at least partly due to concerns surrounding future demand for its products from Volkswagen after the emissions scandal. And with a potential slowdown in Chinese demand for cars, investors have been rather uncertain regarding GKN’s long term future. This, plus a forecast 10% fall in earning this year, has caused investor sentiment in the stock to decline.

However, GKN is due to return to positive growth next year and while it does face a number of challenges, the reality is that demand for cars is likely to remain buoyant due to strong long term demand from emerging markets. While the Volkswagen story is definitely a setback, it’s unlikely to make a major impact on global demand for premium vehicles. As such, GKN’s P/E ratio of 11.4 holds considerable appeal.

Pain threshold

A painful 2015 was also endured by investors in Premier Oil (LSE: PMO), with the falling oil price causing a large deterioration in investor sentiment. In fact, Premier Oil’s share price has fallen by 66% since the turn of the year and it’s realistic to assume that things could easily get worse before they get better. That’s because no ceiling on supply was set at the recent Opec meeting, and with US interest rate rises on the horizon the price of oil could continue to fall during 2016.

This, of course, would hurt Premier Oil’s profitability and could lead to further writedowns in the value of its asset base. However, with it now trading on a price-to-book value (P/B) ratio of just 0.35, it appears as though more pain is already priced in. As such, Premier Oil appears to be worth holding onto at the present time.

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Peter Stephens owns shares of AstraZeneca. The Motley Fool UK owns shares of GKN. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.