Shares in equipment hire company Speedy Hire (LSE: SDY) have risen by around 6% today after it announced the acquisition of railway support services company OHP. The deal will cost Speedy Hire 1.5m plus the potential for a further 0.8m to be paid depending on the future performance of OHP.
The deal increases Speedy Hires exposure to the UK rail sector and with OHPs EBITDA amounting to 800k last year, it appears to be buying the company for a relatively appealing price. And with OHP expected to report increased revenue in the current year, it looks set to provide Speedy Hires financial performance with a boost as well as further strengthen its market position.
With Speedy Hire forecast to increase its bottom line by as much as 90% next year, it trades on a price-to-earnings growth (PEG) ratio of 0.3. Although its financial performance has been somewhat volatile in recent years and it could continue to be so in the long run, its risk/reward ratio indicates that now is the perfect time to buy a slice of it.
Wait and see
Also among the major movers today is healthcare services company Circle Holdings (LSE: CIRC). Its shares are up by 16% despite there being no significant news flow, although the companys shares have been exceptionally volatile of late. In fact, Circle Holdings released a statement a couple of weeks ago to say that it knows of no reason for the share price movements and that it remains focused on pursuing its growth strategy.
Clearly, buying shares in the company right now is likely to lead to wild gyrations in the value of a holding within a portfolio. And while the companys financial performance is due to improve in the current year, its due to be another year of losses. Therefore, it may be best to await further developments on the companys long-term outlook rather than piling in right now.
Stable star
One stock thathasnt been at all volatile of late is British American Tobacco (LSE: BATS). Its share price has outperformed the FTSE 100 by 6% since the turn of the year and further index-beating numbers are very much on the horizon.
A key reason for this is the 7% rise in earnings thats forecast in the current year, with dividends due to rise by 5.2% over the same time period. Although these numbers arent awe-inspiring, theyre highly reliable and at a time when the market is nervous to say the least, stable and resilient stocks such as British American Tobacco could be worthy purchases.
Of course, theres also the potential for higher growth in the long run due to British American Tobaccos exposure to developing markets where the number of smokers is likely to increase. Furthermore, the increasing popularity of e-cigarettes means that British American Tobacco and its peers could prove to be less exposed to regulatory risk with regards to tobacco than is currently being priced-in. Therefore, now appears to be an excellent time to buy it for the long term.
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Peter Stephens owns shares of British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
