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Is this stock a falling knife to catch after today’s share price crash?

I’ve been a big fan of Hays (LSE: HAS) for some time, as I’ve liked its long-term growth potential. And my colleague Royston Wild has recently tagged the recruitment specialist as one he reckons is “in great shape to deliver titanic shareholder rewards over the next 10 years at least.”

I’m with him on that, and I was surprised to see Hays shares crashing by 13% in early trading Thursday after a first-quarter update.

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And that’s despite the company reporting an overall growth in net fees of 9% — which includes the fact that “17 countries exceeded 10% net fee growth, with 10 all-time records.” I’m particularly impressed by a 13% rise in net fees from Germany, and Australia & New Zealand swinging into growth with a 7% rise.

UK weakness

The most notable weakness is here in the UK & Ireland, where net fees grew by only 3%, which is barely above the latest annual inflation rate. That presumably lies behind the day’s sell-off, and it’s surely going to fuel fears that Brexit and the next year or two of potential turmoil in the recruiting industry will weigh heavily on Hays’ profit prospects.

But the UK & Ireland only accounted for 24% of the company’s net fees — Germany is the firm’s biggest single market notching up 27%, so I can’t help feeling that UK-centric worries are overdone.

I also think I’m seeing that typical growth-share reaction, when one quarter comes in a little behind the super-sparkling expectations that investors often take for granted. And that can lead to a sell-off.

Chief executive Alistair Cox said that, despite macroeconomic conditions, “the outlook remains positive across our International markets.”

We’re looking at a forward P/E of around 12.4 now, on current full-year forecasts. Those forecasts might be pared back a little, but this is a cash generative company and I think I’m seeing a buying opportunity.

Big climber

At the other end of the scale on Thursday, struggling Petropavlovsk (LSE: POG) saw its shares leap by 18% at one stage, to 6.1p. But before we get too excited, is it possible we’re just seeing a’dead cat bond’s after September’s first-half update saw the shares heading downwards?

With the firm’s cost of gold production rising, coupled with a 15% drop in production volumes, it swung to an operating loss of $17m from the previous year’s H1 profit of $65m.

Even after Thursday’s recovery, the share price is still down 24% since the start of 2018, and it does seem to have something of an oversold look about it — going on fundamentals, at least. 

Earnings rebound

There’s a loss per share on the analysts’ cards for this year, but they’re expecting to see a rebound back to positive EPS in 2019. That would put the shares on a P/E of only a little over five, which is very low. And production is expected to recover in 2019 as new facilities get going.

But there’s a couple of things that would still keep me away. One is that even if cash costs per ounce do drop to the expected range of $750 to $800, it wouldn’t take much of a fall from today’s gold price of around $1,200 per ounce to eat into those margins. 

I’d also want to see further progress with Petropavlovsk’s turnaround, both financially and in terms of management — the current board hasn’t been in place very long.

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Alan Oscroft 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.

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