Today I’m looking at the share price prospects of three recent surgers.
Metal mover
The severe share price volatility over at Anglo American (LSE: AAL) is yet to show signs of cooling, the stock advancing a chunky 8% between last Tuesday and Friday.
The diversified miner has been helped by a surge in iron ore values since the start of 2016 — the steelmaking ingredient topped the $62 per tonne marker just last month. But concerns over the state of the Chinese construction sector have cast doubts over whether this is nothing more than a ‘bubble.’
Anglo American is undergoing a vast divestment drive to cut its exposure to lossmaking ‘bulk’ commodities, and today announced the sale of its 70% stake in the Foxleigh metallurgical coal mine in Queensland, Australia.
While a necessity given the firm’s battered balance sheet, such measures are likely to prove nothing more than a sticking plaster as vast supply/demand imbalances across key markets continue to deteriorate.
Indeed, Anglo American is expected to endure a fifth successive earnings loss in 2016, this time by a gigantic 47%. This reading leaves the company dealing on a massive P/E rating of 27.1 times, leaving Anglo American in danger of a severe correction given its high-risk profile.
Take a trip
Holiday specialist TUI Travel (LSE: TUI) also enjoyed a bump higher last week, the firm advancing 9% between Tuesday and Friday.
The travel operator spiked following news that revenues were up 3% year-on-year during the six months to March, with TUI Travel managing to shrug off the impact of recent terrorist acts on the continent. Indeed, sales from the UK were up 8% from the corresponding period last year as people simply switched destinations rather than cancel their holiday plans.
The City expects TUI Travel to record earnings rises of 14% in both the years ending September 2016 and 2017, resulting in decent P/E ratings of 12 times and 10.8 times, respectively. I reckon this is great value given the firm’s excellent momentum, with improving economic conditions across Europe set to drive holiday bookings.
Crude clanger
Like Anglo American, oil explorer Enquest (LSE: ENQ) emerged last week as one of the FTSE’s major movers, the company’s shares rising 22% during Tuesday-Friday.
But like its resources peer, I reckon the massive imbalance washing over the oil industry also leaves Enquest in danger of a colossal reversal. Brent values have sunk back below the $40 per barrel marker as optimism over an OPEC-led supply cut have receded, while China’s cooling economy continues to batter hopes of a significant demand revival.
Against this backcloth, Enquest is expected to remain lossmaking until 2017 at least, according to City forecasts. And with the business nursing net debt of $1.55bn as of December, I reckon the producer could find itself on thin ice should crude prices fail to significantly recover.