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Should you buy Tullow Oil plc, John Wood Group plc and Serco Group plc on today’s news?

Today I’m looking at three stocks making the news in Thursday business.

Tullow toils

Shares in Tullow Oil (LSE: TW) have tipped 3% higher in Thursday business, the market seemingly unperturbed by a worrying market update.

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Tullow said that operational problems at its Jubilee field in Ghana pushed West African production to 51,900 barrels per day during January-June, down from 66,500 barrels daily just a year earlier. This result shoved group revenues 37.5% lower, to $500m.

Total output for the region in 2016 is now expected at between 62,000 and 68,000 barrels per day, Tullow added.

Investors continue to pile into the global oil sector as a remedy to their fears of a sharply-cooling British economy in the wake of last week’s pro-Brexit referendum result.

But those expecting an easier ride may end up sorely disappointed. Indeed, the likes of Tullow still face a protracted period of bottom-line pressure thanks to plentiful oil production and insipid demand growth.

Against this backcloth, I believe Tullow is far too expensive, the firm dealing on a massive P/E rating of 88.8 times for 2016.

Services struggler

The trouble washing over the oil segment also makes John Wood Group (LSE: WG) a risk too far, in my opinion. Wood Group advised today that it still expects earnings to slump 20% in 2016, the company adding that  “the current environment remains challenging.”

The services provider maintains a bullish outlook however, citing the benefits of its “asset light” business model and cost-cutting measures. Consequently Wood Group expects to lift the full-year dividend by double-digit percentages this year.

I wouldn’t bet the house on such a scenario materialising however, as revenues are in danger of struggling for some time yet due to oil producers large and small taking the hatchet to their capex budgets.

And Wood Group’s forward P/E rating of 14.9 times, while not exactly shocking on paper, fails to factor-in the firm’s high risk profile. I reckon investors should give the oil play short shrift.

Far too expensive

Outsourcing specialist Serco Group (LSE: SRP) was also edging higher on Thursday after issuing the market with a trading update of its own.

In a short statement Serco reaffirmed its view that underlying trading profit for the year would exceed £65m, with profits “weighted significantly to the first half of 2016” thanks to a series of one-off items.

On the one hand, Serco’s diversified operations spanning many industries give it stronger earnings visibility than many of its Footsie-listed peers. But this doesn’t make the company immune to the problems of Brexit. Meanwhile, Serco’s restructuring plan remains in its very early stages.

A prospective P/E rating of 49 times is far too heady given the work it Serco still has to do, in my opinion.

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Royston Wild 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.

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