The 2014-16 oil price collapse didn't only hammer producers but hurt a lot of other companies besides.
Today, I'm looking at a FTSE 100 giant and a mid-cap firm that both suffered during the period. Their shares have gained since the depths of the rout but are still far below their previous levels. Is it now safe to buy and could there be big gains in store?
In 2014, revenue at Rolls-Royce(LSE: RR) fell for the first time in a decade. The oil price halved through the second half of the year and the company said there was "increased uncertainty for many of our markets and customers, particularly in Marine Offshore".
Revenue in the marine division fell to £1.71bn from £2.04bn the previous year, while profit crashed to £138m from £233m. And in 2015, profit was down to just £15m.
Despite the recovery in the oil price, the company reported yesterday that the marine division had swung to a £27m loss for 2016. Not only that but, in its outlook statement, management said it expects "further weakening in offshore oil and gas markets in Marine".
The bigger picture
Of course, Rolls-Royce has also faced challenges in other parts of its business and chief executive Warren East, who took charge in July 2015, has been working hard to transform the group with wide-ranging management changes and cost-cutting and efficiency programmes.
Despite yesterday's reported loss of £4.6bn, there are signs the business is beginning to stabilise. At a current share price of 705p -- down from a high of almost 1,300p three years ago -- the trailing price-to-earnings (P/E) ratio is 23.4. This relatively high P/E suggests the market is optimistic that the company is set for recovery.
There could be big long-term gains to be had for investors today, while in the shorter term I wouldn't entirely rule out a value-unlocking break-up of the group. Mr East will complete a review of the company over the next few months and promises to "set out an appropriate vision for the business and the best way we can deliver sustainable shareholder value".
Oil equipment and services company Hunting(LSE: HTG) is obviously more extensively exposed to the price of oil than Rolls-Royce. When oil was hitting its lows, Hunting's shares were down to 240p from a previous high of well over 900p.
The company has almost halved its headcount over the past two years and with the improving oil price, a balance sheet strengthened by a £71m fundraising in October and management reporting "improving market indicators", the shares are now up to 585p.
Hunting is not expected to return to earnings growth until next year. The analyst consensus forecast puts the company on a P/E of 30.4, which again shows the market has a high degree of optimism.
However, as with Rolls-Royce, there could be big gains for those investing today for the long term, because earnings could improve very rapidly in a few years' time.
Safe to buy?
Is it now safe to buy these two stocks? Well, it looks like we're past the depths of the oil price crash and, while further volatility is entirely possible, investing in quality businesses when they're going through difficult times can be highly profitable for long-term investors. Safe? No. A good risk/reward proposition? Yes, in my view.
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G A Chester 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.