Within the FTSE 250 index, I’m focused on a company that looks well financed, reasonably priced, and with robust-looking growth forecasts for earnings. Here’s the background.
Some stocks in the energy sector have been waking up recently because of improved trading in their underlying businesses.
I’m talking about oil & gas companies along with the many enterprises that support the exploration and production industry.
For example, there’s been recent share price strength for names like Shell, BP and Serica Energy.
Positive investor sentiment
The price of oil has spent most of 2024 rising, so that’s helped the sector. However, the entire industry can suffer famine or feast conditions because of that one factor alone. Cyclicality is the name of the game here, and that brings both opportunity and risk for investors targeting stocks like the one I’m about to talk about.
However, it’s possible we could be near the beginning of an enduring period of prosperity for the sector. Meanwhile, investors may be looking for the next big thing after running up high-growth tech stocks to eye-popping valuations (particularly in the US). Could the energy sector and commodity-related industries be it? Perhaps.
The most important thing to evaluate is the businesses and how they’re performing operationally. However, general investor sentiment can play a big part in the success or failure of any programme of investment in stocks and shares — so it’s worth considering as part of general research before buying.
The energy sector looks promising to me right now, and the stock I’m focusing on is Hunting (LSE: HTG).
The firm makes precision engineered products and integrated systems, and a print-part manufacturing services. It focuses on the global oil & gas market but also serves the aviation, defence, power generation and space sectors.
Restructuring and refocusing
One of the key things here is the directors are working to streamline and refocus the business. So we’re seeing asset sales and other measures aimed at reducing costs and defining the precise way forward for the company. Such restructuring can be a good thing and lead to better profits later.
Meanwhile, City analysts offer some robust predictions for normalised earnings. They expect increases of almost 90% this year and just over 30% in 2025. But that’s after the business made losses in 2020 and 2021 – such are the outcomes of cyclicality.
The share price chart here tells the story of the longer-term volatility in the enterprise.
There are risks, for sure. But I’m encouraged by the firm’s robust-looking balance sheet and modest valuation. With the share price near 328p (3 April) the forward-looking price-to-earnings ratio for 2025 is running at just over eight.
The company anticipates a dividend set to yield almost 3% in 2025 – handy income to collect while waiting for further business progress to unfold.
I’m fully invested with no spare cash right now, but this stock is at the top of my research and buy list for April when funds become free.
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