Key points
- The London Stock Exchange (LSE) is full of diverse growth shares
- Energean’s revenue increased from $28m to $497m between the 2020 and 2021 calendar years
- Barratt Developments recently acquired Gladman Developments for £250m, increasing its potential construction sites by 406
The London Stock Exchange is full of interesting and diverse companies. I’m currently on the lookout for the best LSE shares to buy now and I think I’ve found two firms that fit the bill. With surging oil and gas prices, I think European giant Energean (LSE:ENOG) could be a good investment for my portfolio at the moment. What’s more, historical results also draw me to residential construction business Barratt Developments (LSE:BDEV). Let’s take a closer look at these two companies.
An oil and gas LSE share
Energean is a giant within the oil and gas industry and operates four segments around the Mediterranean area. These are Europe (especially Italy), Egypt, Israel and new markets, including Malta. Its shares currently trade at 1,174p.
In addition, there is no doubt that the business is also currently benefiting from surging oil and gas prices. Revenue increased from $28m to $497m between the 2020 and 2021 calendar years. WTI Crude oil, for instance, is up 87.75% in the past year and 16% in the past month. It currently trades around $109 per barrel.
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While this is good for firms in the sector at the moment, I question how long this underlying energy price trend can continue.
In an update for the three months to 30 September 2021, the company increased production guidance from 38,000-40,000 barrels of oil equivalent per day (boed) to 40,000-42,000 boed. This is a testament to the firm’s output efficiency and its expanding operations in Israel. Ultimately, it succeeded in achieving production of 41,000 boed.
A residential construction business
Barratt bought Gladman Developments in January 2022 for around £250m. This latter firm specialises in acquiring plots for construction, and brings 406 sites to Barratt’s portfolio. This enhances the potential areas for construction. Barratt currently trades at 506.8p.
In a recent update for the six months to 31 December 2021, the company recorded pre-tax profits of around £430m, an increase of 0.6%, year on year. What’s more, its dividend cover increased by about 50%.
Historically, Barratt’s results are also strong. For the years ended June, between 2017 and 2021, pre-tax profits rose from £765m to £812m, while earnings-per-share grew from 61.3p to 64.9p. This consistent growth is attractive as a potential shareholder. It should be noted, however, that past performance is not necessarily indicative of future performance.
There are risks with this sector, too. Rising interest rates essentially mean that that mortgages will become more expensive. This may cause the housing market to slow down as fewer people are able to purchase new homes. This problem, however, may subside in the near future.
Despite this, I think this LSE share might be cheap. Based on trailing and forward price-to-earnings (P/E) ratios compared to competitor Persimmon, I think the Barratt share price may be undervalued. It has trailing and forward P/E ratios of 8.52 and 6.74, while Persimmon has ratios of 9.07 and 8.53. The idea that I may be getting a bargain is very appealing.
Overall, while there are risks associated with both Energean and Barratt, I think they have strong records and are expanding in a controlled fashion. I will be buying both LSE shares very soon.
