Are Standard Chartered plc, GB Group plc and Camellia plc set to double or halve?
Investors in Standard Chartered(LSE: STAN) are likely to be feeling frustrated with the share price performance of the Asia-focused bank. That's because it continues to offer a hugely disappointing return, being down by 50% in the last year and showing little sign of mounting a successful turnaround.
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Looking ahead, the prospect of a further 50% fall in its valuation may seem real, but in reality Standard Chartered has a much greater chance of doubling. That's because the Asian economy holds exceptional promise for financial services companies such as Standard Chartered, with take-up of products such as pensions and credit likely to soar in the coming years as the middle class expands.
Even in the short term, Standard Chartered has strong growth potential. In the current financial year it's expected to return to profitability and then record a rise in its bottom line of 153% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.1, which indicates that there's scope for a doubling in its valuation. Certainly, it may remain volatile, but Standard Chartered offers a very enticing risk/reward ratio.
High valuation
While Standard Chartered has endured a tough 12 months, shares in data intelligence service provider GB Group(LSE: GBG) have surged by 47%. This is at least partly because of the company's excellent track record of growth, with GB Group's bottom line rising at an annualised rate of 37% during the last four years. And while further growth is forecast for the next two years, GB Group's shares may struggle to replicate their recent past performance.
A key reason for that is the company's valuation. Following such a strong period of growth, GB Group now trades on a price-to-earnings (P/E) ratio of over 31. While its bottom line is due to rise by 9% this year and by a further 14% next year, GB Group's PEG ratio of 2.2 lacks appeal and as such, its shares could come under a degree of pressure. While a 50% fall seems unlikely, there appear to be better options elsewhere.
Wait for a better price
Meanwhile, shares in Camellia(LSE: CAM) have fallen by 10% year-to-date due to challenging market conditions. The diversified agriculture and investment company has seen weakness in its engineering division from the low oil price, while record tea production in Kenya has caused pricing to come under severe pressure. As a result of this, Camellia is forecast to post a fall in its bottom line of 46% in the current year, which has the potential to hurt investor sentiment yet further.
With Camellia trading on a P/E ratio of 33, it appears to be somewhat overvalued given its growth prospects. And while it's a very well-diversified business with a bright long-term future, it seems prudent to await a lower share price before buying-in. While a fall of 50% seems unlikely, Camellia's shares could become more attractively priced over the coming months.
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Peter Stephens owns shares of Standard Chartered. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
