Shares in Petrofac (LSE: PFC) have been unable to maintain their outperformance of the FTSE 100 during the first six months of the year, with the oil and gas services company being up 2% year-to-date, while the FTSE 100 is up 1% over the same time period.
However, an encouraging pre-close trading update prior to its interim results shows that the company has a considerable amount of potential. With this in mind, how does it compare against two of its sector peers: AMEC (LSE: AMEC) and Wood Group (LSE: WG)?
An Impressive Update
Although the unrest in Iraq has caused concern regarding whether it will impact upon Petrofac’s revenues, the company confirmed that it has experienced no disruption thus far. This is pleasing news, since operations in Iraq account for around 5% of the company’s revenues. In addition, Petrofac reported a record order backlog of $20.1 billion and maintained its full-year expectations this week. This is good news, since the company had reduced guidance in its quarterly update in May, which led to shares falling by around 20%.
An Attractive Valuation
After only reversing a relatively small proportion of the previously mentioned share price fall, shares in Petrofac appear to offer good value at current levels. They trade on a price to earnings (P/E) ratio of 12.1, which compares favourably to the FTSE 100’s P/E of 14.1.
Indeed, sector peers, AMEC and Wood Group also appear to offer good value at current levels. They trade on P/Es of 13.8 and 13.4 respectively and show that the oil and gas support services sector offers investors good value for money at current levels.
Looking Ahead
When it comes to growth prospects, all three companies have potential. For instance, Petrofac is forecast to increase earnings per share (EPS) by 26% next year, following an 8% drop this year. AMEC and Wood Group, meanwhile, have EPS growth forecasts of 13% and 7% respectively next year, although it should be pointed out that Wood Group is the only one of the three to be on track to post earnings growth in the current year.
Therefore, while Petrofac appears to be the company with the most attractive valuation, all three stocks have the potential to perform well over the medium to long term. As a result, they all could turn out to be winners, with Petrofac arguably being the pick of an attractive bunch.