Shares in satellite communications firm Inmarsat (LSE: ISAT) have fallen by 38% so far this year, erasing gains made over the last three years.
Sales were flat last year, as strong gains in the aviation market were offset by falls in the maritime and government sectors. These account for 69% of Inmarsat's revenue.
Can Inmarsat recover? I think the business will continue to do well, but I'm not sure about the share price. Inmarsat is still priced for strong growth. The shares trade on a 2016 forecast P/E of 20, falling to 17 in 2017.
Dividend cover has also deteriorated since 2014. This year's forecast earnings of $0.51 per share won't cover the group's forecast dividend of $0.54 per share. Another concern is that debt levels may soon need to be reduced. Last year's closing net debt of $1,985m was seven times the group's after-tax profit of $282m. That's uncomfortably high, for me.
I suspect Inmarsat could still have further to fall.
An oily outsider?
Whereas most mid-cap oil stocks have rallied strongly on the back of the rising oil price, Soco International (LSE: SIA) hasn't. The Vietnam-focused firm's share price has fallen by 18% so far in 2016.
I think this may be too pessimistic. Soco generated free cash flow of about $28m last year, after exploration expenses. The firm also ended the year with net cash of $103.6m, despite returning $51m to shareholders.
Soco expects to produce 10,000 to 11,500 barrels of oil equivalent per day this year, at an operating cost of just $10 per barrel. As far as I can see, the business should remain free cash flow positive.
A $52.7m deferred payment relating to the 2005 sales of some assets in Mongolia is also expected later this year. Soco says it will consider a further distribution of cash to shareholders during the second half of the year.
Soco is run by founder chief executive Ed Storey and his deputy Roger Cagle. Both men are at retirement age and have substantial shareholdings. A focus on cash returns makes sense. I suspect Soco could be a profitable buy at current levels.
Debt is a big worry
At first glance, offshore platform operator Gulf Marine Services (LSE: GMS) looks amazingly cheap. The £187m firm's shares trade on a 2016 forecast P/E of just 4.9, falling to 3.1 in 2017.
However, Gulf's net debt rose to $398m last year as it continued to complete a major fleet expansion project. Converted into sterling, Gulf's net debt is about £275m, or around 50% more than its market cap.
In my view, this is why the shares are so cheap. Markets are pricing-in possible debt problems for Gulf. The group warned recently that profit margins are likely to come under pressure in 2016, as customers demand lower charter rates.
On the other hand, Gulf's modern fleet appears to be in demand. Fleet utilisation was 98% in 2015. The firm expects net debt to start falling once the current fleet expansion is complete, which should happen this year.
Gulf may manage to stay on top of its finances without running into problems. If so, then a 50% rise in the firm's share price is entirely possible. But in my view it's a big risk for investors to take.
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Roland Head has no position in any shares mentioned. 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.