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How high can the Genel Energy share price go?

After three successive years of losses, oil producer Genel Energy (LSE: GENL) returned to profitability in 2017. During the course of the last year, the company’s share price has risen by over 80% as investors have begun to factor in an improving financial outlook for the business.

Looking ahead, the company’s valuation suggests that it could offer further capital growth prospects. With the oil price having the potential to move higher, it could deliver a rising bottom line. However, it’s not the only growth stock that could be worth buying. Reporting on Thursday was another mid-cap share that may deliver a rising valuation.

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Improving outlook

The company in question is gaming business 888 Holdings (LSE: 888). It released half-year results which showed a rise in revenue of 1% to $273.2m, with adjusted profit before tax increasing by 13% to $42.5m. Its performance in the Casino and Sport segments was strong, with it recording impressive performance in continental Europe. In the UK, it has started to see positive trends since the end of the period, while in the US it continues to have a bright long-term growth outlook.

The repeal by US lawmakers of sports betting rules means that there could be a sizeable growth opportunity for 888. It already has established partnerships and a strong presence in the country. This could allow it to capitalise on the changing nature of the gaming industry that could lead to rising profitability in the long run.

With the company continuing to pump cash into innovation so it can improve customer satisfaction, it seems to have a solid growth strategy. Its bottom line is expected to rise by 6% next year, but improved performance could be ahead in the coming years. As such, now could be a good time to buy it.

Rising profitability

The outlook for Genel Energy may also be set to improve. Although the oil price has already risen in recent months, the prospects for further gains seem to be high. Demand growth is expected to remain consistent over the medium term, with a growing world economy helping to keep momentum at similar levels to 2018 through the course of 2019. And with the potential for political risk across various OPEC members, the prospect of lower supply growth seems to be increasing.

This could lead to improving profitability for Genel Energy and its peers. The company has production costs that are among the lowest in the industry, while a reduction in geopolitical risk in the Kurdistan region of northern Iraq in the last couple of years has meant that its financial prospects appear to be improving.

With the stock trading on a price-to-earnings growth (PEG) ratio of just 1.1, it seems to offer a wide margin of safety. While potentially volatile due to the uncertainty of the region in which it operates and the possible changes in the oil price, it seems to offer a favourable investment outlook and could deliver further share price growth.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.