Are Sirius Minerals plc, SafeCharge International Group Ltd and Renew Holdings plc set to double or halve?

Bright growth prospects

With shares in Renew Holdings (LSE: RNWH) rising by around 9% today, it must seem as though the company’s growth prospects are extremely bright. That’s because with Renew Holdings being focused on UK infrastructure and its development, a rise in support for remaining in the EU (according to opinion polls) means that its near-term future is arguably a little more certain.

However, the referendum vote could still go either way and, as a result, Renew Holdings’ share price is likely to be volatile in the short run and could realistically move significantly in either direction.

In the long run, Renew Holdings seems to offer an appealing risk/reward ratio. That’s because it has bright growth prospects and yet trades on a relatively low valuation. For example, Renew Holdings is forecast to increase its bottom line by 5% in the current year and by a further 13% next year.

Despite this, it has a price-to-earnings growth (PEG) ratio of 0.8, which indicates that for investors who can live with above average volatility, it could prove to be a sound buy. Although a doubling of its share price may be some years away, Renew Holdings could deliver sizeable returns moving forward.

Favourable outlook

Also offering upbeat earnings growth prospects is mobile and online payment specialist SafeCharge (LSE: SCH). It is forecast to increase its bottom line by 37% in the current year and by a further 14% next year following a disappointing 2015 where its net profit fell by 2%. As a result of this downbeat past performance, SafeCharge’s shares have fallen by 21% in the last year as investor sentiment towards the company has weakened.

This fall in valuation presents an opportunity for long term investors to buy in at a discounted price. The mobile payments solutions space offers a favourable outlook as it become more prevalent and with SafeCharge trading on a PEG ratio of 1, it appears to offer strong growth at a very reasonable price.

Certainly, it is a smaller company which could have a somewhat volatile share price, but for less risk averse investors it now looks set to perform well as an investment. This doesn’t mean that it will necessarily double in value, but it does mean that its risk/reward ratio is relatively favourable.

A long way to go

Meanwhile, Sirius Minerals (LSE: SXX) has been a surprisingly strong performer in 2016, with its shares having risen by 19% year-to-date. Part of the reason for this has been improved sentiment towards the wider mining sector and this bodes well for Sirius Minerals’ financing requirements. On this front, Sirius Minerals is a somewhat risky proposition since it requires major fundraising to pay for its proposed £1bn+ potash mine in York.

With the outlook for commodity prices now being rather more positive than it was a number of months ago, Sirius Minerals may find it easier to generate the funds required. However, a failure to do so or a commodity price collapse akin to that seen in recent years could cause Sirius Minerals’ shares to come under severe pressure.

Clearly, in the long run they have the potential to double, but there is a long way to go before Sirius Minerals becomes a profitable entity. Therefore, it may be prudent to invest elsewhere – especially with a number of bargains being around in the stock market at the present time.

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Peter Stephens has no position in any shares mentioned. 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.