The FTSE 250 has been exceptionally volatile in recent weeks, and this trend could continue in the near term. Fears surrounding the UK economy, as well as the world economy, could linger in investors’ minds and cause stock prices to come under pressure.
Against this backdrop, companies such as Tullow Oil (LSE: TLW) may now offer good value for money. The company appears to have improving financial prospects which could lead to a rising share price over the medium term. However, it’s not the only FTSE 250 share which could be worth buying at the present time.
Reporting on Thursday was speciality chemicals company Elementis (LSE: ELM). It released a third quarter trading update which showed that it has delivered resilient performance, being on track to perform as per previous guidance.
In its personal care division, sales to direct customers of its high-margin hectorite-based products continue, while in its coatings division its transformation programme has made progress. Activity levels in its energy segment improved, being driven by new business and early signs of a recovery in deep water drilling. In its chromium segment, the company’s production has been disrupted due to Hurricane Florence. However, demand has remained strong.
Looking ahead, Elementis is forecast to post a rise in earnings of 10% in the next financial year. With the company’s shares trading on a price-to-earnings growth (PEG) ratio of 1.7, they appear to offer a margin of safety. With the overall performance of the business being relatively sound and it having what appears to be a logical growth strategy, its overall investment prospects appear to be improving.
The prospects for Tullow Oil appear to be relatively uncertain at the present time. There is a general concern among investors that the world economy will experience a slowdown in its rate of growth. This could be caused by a rising US interest rate, or by tariffs being placed on imported goods by the US and China. Either way, investor sentiment has weakened significantly in recent weeks, and this trend could continue over the near term.
The oil and gas sector, though, may be supported by geopolitical risks across a number of OPEC nations. Saudi Arabia has been in the spotlight of late, with sanctions being a possibility. Iran and Venezuela are already facing the prospect of supply disruption, and when taken together this could cause supply growth to fall behind demand growth for oil – even in a weaker world economy.
As such, Tullow Oil could enjoy favourable oil prices over the medium term. The company is expected to post a rise in earnings of 11% next year, with its shares trading on a PEG ratio of 1. This suggests that investors have not yet factored in its improving financial outlook, and that there could be capital growth potential on offer.
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Peter Stephens owns shares of Elementis. The Motley Fool UK has recommended Elementis. 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.