Is It Time To Buy AFC Energy plc, SThree Plc And Blinkx Plc?

Recruitment company SThree (LSE: STHR) released a rather mixed update today that sent its shares almost 7% lower. While it’s on-track to meet full-year expectations regarding profitability, SThree has been hit by the downturn in energy markets with its energy division acting as a drag on its wider performance.

In fact, gross profit would have been 17% higher than last year were it not for that division, where reduced staffing requirements and cutbacks to recruitment budgets have hit hard. This means SThree’s gross profit is up by 11% which, given the macroeconomic uncertainty experienced in the final quarter of the year, is nevertheless a relatively strong result.

Looking ahead, SThree is expected to increase its bottom line by 9% in the current year. With the company’s shares trading on a price-to-earnings (P/E) ratio of 14.4, this equates to a price-to-earnings growth (PEG) ratio of 1.6. This indicates that the company’s shares could be set to reverse their 18% decline of the last six months over the medium term.

Clearly, the market has reacted negatively to the results. But while further challenges within its energy division remain, SThree’s ICT and Life Sciences divisions should offset tough trading conditions in 2016. So while it’s likely to be volatile, SThree appears to be a sound long term buy.

Powering ahead

Similarly, buying hydrogen fuel cell specialist AFC Energy (LSE: AFC) could prove to be a worthwhile move. Its shares have soared 23% in December, despite there being no significant news flow released by the company.

Looking ahead, AFC is expected to update the market within the next few weeks regarding progress on the final milestone of its KORE fuel cell system. This will involve the full commissioning of the system, with 240kWe of power expected to be produced. Due to the pending release of this update, AFC’s share price could be highly volatile in the coming weeks and is highly dependent upon news flow in the short run.

Longer term, AFC appears to be making encouraging progress with its ambitious plan and with a Heads of Agreement having been signed with Dutco, it appears to be in a relatively strong position regarding the potential commercialisation of its system. With cleaner energy likely to be an exciting growth space over the long run, AFC could be a strong performer in 2016 and beyond – albeit a relatively risky one.

Cash rich

Meanwhile, online advertising company Blinkx (LSE: BLNX) is in the middle of a transformational change. This includes a shift from desktop to mobile as well as an acquisition strategy making use of the company’s main strength – its large cash pile. And with Blinkx reorganising its product offering, it appears to be moving in the right direction. In the long run, it could become an improved business as a result.

However, now doesn’t appear to be the right time to buy a slice of Blinkx. It’s expected to make a pre-tax loss of £15m in the current year and then a further pre-tax loss of £8m next year. While losses are due to narrow, there doesn’t appear to be a clear catalyst to push the share price higher. So, while Blinkx trades on a relatively low valuation with a price-to-book value (P/B) ratio of 0.8, for now it appears to be a stock to watch, rather than buy.

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Peter Stephens owns shares of AFC Energy. 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.