Back in December I took a good look at Petrofac (LSE:PFC) and concluded it was undervalued; albeit with an attached risk due to an SFO investigation overshadowing the company. The share price did subsequently recover from £4.60 to £5.85. January saw a strong decline in the price, once again nearly slumping to £4.00 at the beginning of February. The price has increased by almost 20% since to £4.78; that is until today.
The company has announced its full-year results, and the market has reacted negatively, 5% of its value as I write despite opening up higher this morning. Underlying performance has improved with a 7.2% increase in profits to $343m but exceptional items, which included $350 in non-cash items, pulled the overall figures into the red by $29m. Net debt remains at $600k.
The share price chart shows evidence of significant consolidation around the £4.15-£4.40 region. Movement in the price so far today does suggest the market is very undecided, although this stock has been a trading favourite for its large swings for some time.
This dip today may offer a good re-entry level for those sitting on the fence waiting for the results. Barring no major bad news regarding the SFO investigation, downside at the moment appears to be towards the £4.00 area. A potential return to recent highs or higher seems a reasonable target for the more risk-averse investor.
Author: Stuart Langelaan
Disclosure: The author of this piece owns shares in the company written about above