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This double-your-money stock and turnaround growth play could both be set to shine

Defence and aerospace outfit Cobham (LSE: COB) has seen its share price plunge to earth in the last four years and there is no sign of a rebound today after it published an 8% year-on-year drop in underlying operating profit to £196m.

Mission possible

The FTSE 250 company is down 1.5% today but 47% compared to five years ago. Does it offer an exciting turnaround opportunity or should you prioritise Acacia Mining (LSE: ACA), a sparkling growth opportunity that has doubled investors’ money since the autumn?

Cobham’s drop in underlying operating profits was aggravated by £5.5m adverse currency translation and £22.5m lost contribution from divestments. The £2.8bn group reported encouraging order intake, up 13% at constant currency, excluding divestments. Mission Systems delivered a strong performance, although its US-focused operation Advanced Electronic Solutions arm underperformed, and is now looking to slash costs with savings of $20m this year.

Boeing, Boeing, gone

Last time I looked at Cobham it was facing a claim for unquantified damages from US aviation giant Boeing, after problems in its KC-46 aerial refuelling tanker programme. This was settled last month at a total cost of £160m, but at least investors have got greater certainty in return. The stock is up 10% since the news broke.

The good news today is that Cobham plans to reinstate a progressive dividend policy after strengthening its balance sheet in 2018. It now holds a net cash balance of £10.3m, against net debt of £383.5m a year earlier. Investors can expect a full-year dividend of 1p.

Earnings growth

2019 expectations remain unchanged and CEO David Lockwood said that he continues to believe that there are considerable opportunities to improve the performance of the group over the medium term.” Last time I looked at the stock I thought it was a bit pricey and although it is now slightly cheaper at 18.2 times earnings, and with a PEG of just 0.8, I’m still cautious.

The forecast dividend is 1.8%, although cover is 2.9. However, after three successive years of double-digit negative earnings growth, City analysts are predicting 25% this year and 26% in 2020. If correct, Cobham might just have lift-off.

Out of Africa

Tanzania-based gold mining group Acacia has shone lately, its share price doubling in a matter of months, helped by a 10% rise in the gold price over that period. However, today’s price of 206p is just a third of its 2010 flotation price of 575p. The group hit trouble in 2017 when the Tanzanian government banned it from exporting gold-bearing ore and hit it for claims totalling $190bn.

Your view of the FTSE 250 stock will partly depend on what you think of gold as an investment, as that will affect mining stock performance. Some exposure could give you nice portfolio diversification, especially with stock markets currently uncertain after a 10-year bull run.

Gold standard

Recent full-year results were good although Roland Head says it remains a speculative buy. I guess that applies to any stock that has doubled investors’ money in such a short period. The dispute with the Tanzania government rumbles on, which means it can only export gold bars, not ore.

The £883m company trades at 12.8 times forecast earnings, which are expected to rise 105% in 2019, then another 12% in 2020. There is precious little yield, though. It’s risky. But tempting too.

Capital Gains

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Harvey Jones 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.