The last five years have been rather successful for Hunting (LSE: HTG) as a business. Thats because it has managed to increase its bottom line in each of those years, with the rise averaging 32% per annum. Despite this, its shares are down by 18% during the period, and a key reason for this is that Huntings current year performance is set to be hugely disappointing.
In fact, the companys bottom line is forecast to fall by 54% this year, with weak energy prices being a key contributor. And, even though Hunting does trade on a rather rich price to earnings (P/E) ratio of 17, it is expected to return to growth next year, with its bottom line all set to rise by 10%. As such, it trades on a price to earnings growth (PEG) ratio of 1.4, which indicates that it is a sound buy at the present time.
With a new management team recently taking the reins at BG (LSE: BG), investor sentiment could pick up over the short term. Certainly, changes are likely to lie ahead for the business but, with an excellent asset base, BG continues to have considerable appeal even though its bottom line is expected to fall by 66% in the current year as lower energy prices hit the company hard.
However, BG is due to recover and, although next years earnings are still almost certain to be below those reported last year, BG currently trades on a PEG ratio of just 0.2. This indicates that even if its comeback is less successful and takes longer than expected, then there is still enough of a margin of safety included in its current share price for it to deliver impressive share price gains over the medium to long term. As a result, now could be the right time to buy a slice of it.
Since LGO (LSE: LGO) is much smaller than BG and Hunting, it inevitably comes with more risk. And, even though its news flow has been relatively upbeat in recent months concerning its major asset, the Goudron field in Trinidad, the share price growth that has been recorded in the last year of 218% may not be repeated moving forward. Thats because news flow is unlikely to remain so upbeat in perpetuity.
Still, LGO has considerable potential and, following its new financing facility and further progress in Trinidad, it remains a relatively appealing small cap oil play that could perform well over the medium to long term. Certainly, a continued low oil price may hold back its progress somewhat, but LGO appears to be in a strong position to lower costs and increase output moving forward.
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