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Within FTSE 250 Index, I'm focused on a company that appears to be well-funded, reasonably priced, and with solid earnings growth forecasts. Here's the background.
Some energy stocks have been waking up recently due to improving operations in their underlying businesses.
I'm talking about oil and gas companies and the many companies that support the exploration and production industry.
For example, there has recently been strength in the share price of names like Shell, PA and Serial Energy.
Positive investor sentiment
The price of oil has spent most of 2024 rising, which has helped the sector. However, the entire industry may suffer from famine or banquet conditions due to that factor alone. Cyclicality is the name of the game here, and that creates opportunities and risks for investors targeting stocks like the one I'm about to mention.
However, we may be near the beginning of a lasting period of prosperity for the sector. Meanwhile, investors may be looking for the next big thing after high-growth tech stocks reached eye-popping valuations (particularly in the US). Could the energy sector and industries related to raw materials be? Maybe.
The most important thing to evaluate is the companies and their operational performance. However, general investor sentiment can play a big role in the success or failure of any stocks and shares investment programme, so it is worth considering it as part of your overall research before purchasing.
The energy sector looks promising to me at the moment and the stock I am focusing on is Hunt (LSE: HTG).
The company manufactures precision engineered products and integrated systems, and printed parts manufacturing services. It focuses on the global oil and gas market, but also serves the aviation, defense, power generation and space sectors.
Restructuring and refocusing
One of the key things here is that the directors are working to rationalize and refocus the business. That is why we are seeing asset sales and other measures aimed at reducing costs and defining the precise path forward for the company. This restructuring can be a good thing and lead to better profits in the future.
Meanwhile, City analysts are offering some strong predictions about earnings normalising. They expect increases of almost 90% this year and just over 30% in 2025. But that's after the business suffered losses in 2020 and 2021: such are the results of cyclicality.
The stock price chart here tells the story of long-term volatility in the company.
There are risks, sure. But I'm encouraged by the company's strong balance sheet and modest valuation. With the share price close to 328p (April 3), the forward-looking price-to-earnings ratio for 2025 is just over eight.
The company forecasts a dividend that will generate almost 3% in 2025, a useful income to raise while waiting for new business developments to develop.
I am fully invested and have no extra money right now, but this stock is at the top of my research and purchase list for April when funds are free.
