Why BP plc could make you brilliantly rich
While the FTSE 100 may have risen to a record high this year, there are still stocks on offer which could deliver growth at a reasonable price. For example, the outlook for the oil and gas sector has improved dramatically in recent months. The price of oil has risen to its highest level since 2015, and this means that oil and gas producers such as BP(LSE: BP) could generate higher profitability in future.
In turn, this could mean that the company is able to command a higher valuation as investors begin to price-in greater earnings power. As such, now could be a perfect time to buy the oil major while it still trades at a relatively low price.
After a number of years of significant challenges, it looks as though BP could finally be turning a corner. The company is forecast to return to profitability in the current year after two years of losses. This seems to have improved investor sentiment in the firm, with its stock price rising by over 11% during the last three months.
This situation could continue over the medium term. It is forecast to record a rise in its bottom line of 34% in the next financial year as investment in its asset base and improved prospects for the oil price are expected to continue. Despite this, BP trades on a price-to-earnings growth (PEG) ratio of just 0.5. This suggests that it may be undervalued at the present time.
With the supply surplus of oil expected to be kept in check to at least some degree by rising demand and the potential for further supply restrictions from OPEC, the outlook for the oil price may be positive. This could mean that now is the right time to buy BP ahead of what may be a significantly improved financial period for the business.
Also offering the prospect of growth potential at a reasonable price is Veltyco (LSE: VLTY). The online marketing company for the gaming industry released a trading update on Tuesday which showed that its strategy is performing well. In fact, trading since its interim results were released in September has been strong. This means that the company now expects revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) to be significantly ahead of market expectations for the current year.
Since the interim results, the company has continued to grow. The Bet90 brand has launched its new website which has performed well. Bet90 is also expected to enter the South American market and this could positively impact on the overall performance of Veltyco.
Looking ahead, it is forecast to post a rise in its bottom line of 6% in the next financial year. This puts it on a PEG ratio of only 1.6, which suggests that it could offer excellent value for money at the present time. Certainly, it is a relatively small company which could remain volatile over the short run. However, with its shares rising by 16% following Tuesday's update, investor sentiment appears to be strong and this could help to push its share price higher.
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Peter Stephens owns shares in BP. The Motley Fool UK has recommended BP. 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.