Will the Sirius Minerals share price ever recover to 38p?
The last six months have been tough for most investors. The FTSE 100, FTSE 250, and a wide range of smaller shares have experienced declines that have caused investors to reconsider their attitude towards risk. Suddenly, the seemingly never-ending bull market of recent years is experiencing difficult prospects, and an increasingly risk-off attitude is generally being adopted.
As a result, shares such as Sirius Minerals(LSE: SXX), which has dropped 42% since reaching 38p in August, seem to be relatively unappealing. However, alongside another stock that has also endured a disappointing period of share price performance, but yet reported encouraging results on Wednesday, the investment case may now be stronger than it was a number of months ago, in my opinion.
Strong position
The company in question is property investment business Helical(LSE: HLCL). It released half-year results for the period to 30 September, with it suggesting that the business is in a strong position to deliver impressive long-term growth.
For example, it’s been able to complete two of its largest developments during the period, which leaves just two major projects outstanding. Alongside this, it’s been able to make good progress in letting space at its major projects, while also strengthening its balance sheet.
Of course, the prospects for the UK commercial property industry remain uncertain. Brexit may cause further disruption in the near term, and this could weigh on operators in the sector. However, with the Helical share price having fallen by 20% in the last six months, it now seems to offer a wide margin of safety, which could increase its investment appeal. In fact, it has a price-to-earnings growth (PEG) ratio of 0.7 at the present time, which suggests it could deliver an improving share price performance in the long run.
Turnaround potential
As mentioned, the Sirius Minerals shares have experienced a severe decline in the last few months. Given that the stock is relatively risky in terms of it having no revenue or profit, with first production of its polyhalite fertiliser not due for a few years, it’s arguably one of the more speculative shares in the FTSE 350 presently. Since investors now appear to have a more risk-off attitude, it’s therefore unsurprising that the company has seen its share price fall, with further declines possible should the wider market experience continued challenges.
As is often the case though, share price falls can lead to buying opportunities. Despite the costs of the project being higher than expected, Sirius Minerals seems to be moving ahead with the successful execution of its strategy. This could mean that its estimates for sales and profitability in the long run will still be delivered, and investors can now buy into that growth story at 22p, rather than 38p from a few months ago. As such, it could be of increasing interest to less risk-averse investors.
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Peter Stephens owns shares of Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. 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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