Shares in AFC Energy (LSE: AFC) have risen by as much as 5% today after the company released a hugely positive announcement that has the potential to improve investor sentiment over the medium term. In fact, the companys CEO, Adam Bond, described todays news as one of the proudest moments in AFCs history, with the company having commissioned and commenced operation of its KORE fuel cell system in Germany. Furthermore, AFC Energy is on-track to deliver full commercial scale electricity output in the second half of this year.
Clearly, the news is hugely positive for the company and, with it moving into profitability in its most recent half year, AFC Energy appears to be on the up. Of course, many investors may consider that its shares are due a pullback, having soared by 482% since the turn of the year. However, with it being on-track to produce around 240 kilowatts of electricity by the end of 2015 and being another step forward on its eleven-point POWER-UP plan, AFC Energy seems to be a sound buy.
Furthermore, AFC Energy could become a highly relevant business over the long run, with its use of waste hydrogen to produce cleaner electricity likely to fit in well in an ever-increasinglyenvironmentally-aware world. Sowhile it currently trades on a price to book ratio of over 17, AFC Energy has tremendous growth prospects which could push investor sentiment (and its share price) to new highs.
Of course, the world is not yet ready to make a complete break from fossil fuels. And, while the near-term outlook for the oil price is rather dire, valuations in the sector can be hugely appealing even though asset impairment and declining profitability are becoming rather normal events for oil explorers and producers.
In fact, Tullow Oil (LSE: TLW), has been hit by the lower oil price and evidence of this can be seen in the whopping 1.3bn loss that was posted last year. While painful for the companys investors, Tullow Oil is expected to make a comeback in the current year, with a pretax profit of 108m currently being pencilled in. And, next year, Tullow Oil is forecast to post a rise in profit of almost 150%, with its pretax profit due to reach 266m.
Clearly, such a rise in profitability is likely to cause investor sentiment to improve. And, with Tullow Oils share price having fallen by 42% since the turn of the year, there is tremendous scope for this to take place. For example, even a rise in Tullow Oils share price of 20% would still leave it trading at around net asset value, since it currently has a price to book ratio of 0.83.
Of course, there is the possibility of a further fall in the price of oil and, were that to happen, Tullow Oils outlook would be likely to worsen. However, with such a wide margin of safety and such positive expectations, even a decline in its outlook may not hurt its share price to a great extent, with the scope for a significant upward rerating making the present time a good opportunity to buy a slice of the company while it is very, very cheap.
As you are probably all too aware, finding stocks that are worth adding to your portfolio is a tough task, which is why the analysts at The Motley Fool have written a free and without obligation guide called 10 Steps To Making A Million In The Market.
It’s a simple and straightforward guide that could make a real difference to your portfolio returns. As such, 2015 could prove to be an even better year than you had thought possible.
Click here to get your copy of the guide – it’s completely free and comes without any obligation.
Peter Stephens owns shares of AFC Energy. The Motley Fool UK has recommended Tullow Oil. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.