While the FTSE 100 could post further falls after declining by over 10% since May, weak stock markets can provide buying opportunities. Certainly, there is scope for a continued drop in the ITV (LSE: ITV) share price, for example. But with the company appearing to have a sound strategy and a strong position within its market, it could offer impressive reward prospects in the long run, in my opinion.
Clearly, it’s not the only stock to have experienced a fall in market value in recent months. Could another stock which reported positive results on Friday eventually deliver a successful turnaround?
The stock in question is Parkmead (LSE: PMG), which is an energy group that is focused on the UK and Netherlands. It released results for the year to 30 June 2018, with revenue increasing by 70% versus the previous year. Its gross profit increased by 242% to £4.1m, while it remains well-capitalised due to a cash position of £23.8m and no debt. The company has benefited from enhancing its gas production in the Netherlands, with the combination of its various divisions providing the wider group with increasing balance.
During the period, Parkmead completed seven acquisitions. It has also made progress with its Greater Perth Area project, with an increase in its stake providing it with a rise in oil and gas reserves of 67%. Increased production at its Diever West gas field helped to boost its cash flow, while it continues to seek further acquisitions.
As such, the company appears to be performing relatively well. Although it remains relatively risky and lacks the size and scale of some of its rivals, its long-term growth potential could be improving.
Having declined by 18% since early July, the ITV share price seems to offer a relatively wide margin of safety. The stock trades on a price-to-earnings (P/E) ratio of around 9.5, which suggests that it could offer good value for money. Furthermore, a dividend yield in excess of 5%, which is covered over 1.9 times by profit, suggests that there could be improving income returns ahead for the business.
Of course, parts of ITV’s business are underperforming at the present time. A weak UK economy is contributing to a general slowdown in demand for advertising, although the company’s online advertising has continued to deliver high growth rates. In the near term, it seems unlikely that the performance of the wider sector will drastically improve, given the prospects for the UK economy. But as a cyclical stock, this is perhaps to be expected at certain times over the long run.
As such, now could be the right time to buy ITV. It may deliver further paper losses in the near term as it faces difficult operating conditions. But from a long-term investment perspective, buying cyclical shares during tough economic periods could prove to be a logical strategy.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.