Shares in consultancy company RPS (LSE: RPS) have tumbled by over 15% today after it announced cutbacks in response to a challenging outlook for the oil and gas sector. That’s despite 2015 financial performance being in line with expectations, with investors understandably more concerned about the company’s future than its past performance.
Disappointingly, RPS has seen a downward trend in spending by oil and gas companies and with the oil price having the potential to remain at low levels over the medium term, further declines could be on the cards. As a result, RPS plans to further reduce the capacity of its energy division, with restructuring charges and impairments being one-off costs that could be recorded in future.
With RPS trading on a price-to-earnings (P/E) ratio of just 8.9, its shares are dirt cheap. And while profitability could come under pressure as spending across the oil and gas industry declines, buying shares in RPS could be a sound move for long-term investors. Certainly, volatility will likely remain high, but with such a low rating there’s clear upside potential.
Pick ‘n’ mix
Also falling today is marketing company Creston (LSE: CRE), which is down over 15% having released a mixed update. On the one hand, the company’s third quarter delivered upbeat revenue growth, with the top line rising by 11% versus the comparable period last year. However, a number of Creston’s clients have advised it of project delays in the first part of 2016 and this will cause a significant reduction in revenue in the final quarter of the current year.
Due to this, Creston expects pre-tax profit to be slightly below the prior year’s figure of £9.9m and also expects to record exceptional charges against profit in the current year. Despite this, the company remains optimistic regarding its long-term growth potential and it has enjoyed a number of key business wins in recent months.
With Creston trading on a P/E ratio of only 7.9, it appears to be worth buying for the long term. Further share price falls can’t be ruled out in the short run and additional charges may be recorded in the coming months. But for less risk-averse, long-term investors its risk/reward ratio appears to be favourable.
Shares in Sirius Minerals (LSE: SXX) are also down by more than 15% today after it released a statement to say that it’s delaying the definitive feasibility study for its potash mine in York. It was originally due to be released by the end of January but won’t now be released until March.
Although the delay is understandable given the fact that the project is large-scale, investors are understandably disappointed by the delay. However for such a major project, delays are almost inevitable and today’s share price fall shows that the market may have had unrealistic aims on how quickly and smoothly the process would move forward.
With history showing that further delays and challenges remain relatively likely on such a large project, more volatility in Sirius Minerals’ share price seems to be on the cards. However, for investors who aren’t so risk-averse and who have a long-term view, it continues to be of interest.
