Ted Baker or Premier Oil: which shares would I buy?

Both Ted Baker plc (LON: TED) and Premier Oil plc (LON: PMO) make for potentially good long-term investments given their future outlook, but I am more optimistic about the latter.

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Fashion brand and retailer Ted Baker’s (LSE: TED) tale of woes refuses to end. It all started in December last year, when the founder and CEO, Ray Kelvin, was charged with questionable conduct. Very recently, the company’s trading update disappointed. It opened with the heading “Difficult trading period with ongoing external challenges impacting performance”, setting the tone for the rest of the update. The company’s revenue declined by 1.1%  during the 19 weeks ending June 8, 2019 and it also spoke of lower margins.

Challenged by present market conditions

I still think that it’s a good share to consider for the long haul, however. At present it’s essential to look at it in the context of the wider environment. Other fashion retailers are struggling too. Burberry’s latest results underwhelmed investors, especially on account of weakening demand in China. And most recently, the Marks and Spencer share price fell to multi-year lows as it continues to come under the wheels of shifting demand patterns.  

So far, Ted Baker has performed well in a changing consumer environment with broadly rising revenues as well as profits year after year.  For this reason, despite the speed bumps it has been hitting recently, I am inclined to consider it favourably. Moreover, we at The Motley Fool are interested in long-term investing opportunities. And going by CEO Lindsay Page’s statement at the time of the trading update release, the company’s “long-term growth prospects” appear sound. It remains to be seen, of course, if the FTSE 250 retailer is able to sustain its performance over time but I would definitely keep it on my radar.

Positive trends drive Premier Oil

Premier Oil (LSE: PMO) is another FTSE 250 company whose shares hit a low recently, a level not seen since February this year. I can’t see any specific reason for the decline in share price; in fact, I think there are some positives worth considering here. For one, on May 16, it said that its year to date production was 14% higher compared to the same period of the previous year. It also increased its production guidance for the year.

The company’s debt levels have been high, but the latest update is optimistic on that count as well. As per CEO Tony Durrant’s statement at the time of the release, the company’s reducing its debt “faster than anticipated”. In fact, this would be the third consecutive year in which it will reduce its net debt, if we go by the outlook.  It’s also worth noting that the company returned to making profits in 2018, after reporting losses in the previous year.

At the present point in time, given the subdued price levels and positive future outlook, I would be inclined to consider this as an investment worth further research. Of the two FTSE 250 companies covered here, I am more optimistic about Premier Oil as an investment, but am by no stretch pessimistic about Ted Baker, either.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry and Ted Baker. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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