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Worleyparsons Limited and Mermaid Marine Australia Limited: Should you buy?

It’s been a tough year for investors in Worleyparsons Limited (ASX: WOR) and Mermaid Marine Australia Limited (ASX: MRM), with the shares in both companies being in the red year-to-date. Indeed, while the ASX has kicked on to surpass six-year highs and rise by 6% in 2014, Worleyparsons is down 2% and Mermaid Marine has seen its share price fall by a whopping 34%.

However, does this mean that both stocks are now good enough value to warrant buying at current price levels? Or, are they to be avoided?

Growth potential

Perhaps the biggest surprise to prospective investors is the growth potential that is on offer at both companies. For example, engineering and construction company, Worleyparsons, is expected to increase its bottom line at an annualised rate of 14.8% over the next two years. Furthermore, marine services provider, Mermaid Marine, is forecast to grow its net profit by 7.9% per annum over the next two years. This is very much in-line with the wider market and shows that there is strong growth potential on offer at both companies.

Valuation

After their disappointing share price performance during 2014, both companies offer great value for money right now. In terms of their P/E ratios, they are well below that of the ASX (which has a P/E of 16), with Worleyparsons having a P/E of 14.9 and Mermaid Marine’s being just 11.5.

However, it is when their respective P/E ratios are combined with their growth potential that the upside prospects really become clear. That’s because, with low P/E ratios and impressive growth rates, the two stocks have price to earnings growth (PEG) ratios of just 1.01 (Worleyparsons) and 1.46 (Mermaid Marine).

Income potential

However, there’s more to both stocks than just growth potential and a low valuation. They also come with top notch yields, too. For instance, Worleyparsons has a 20.5% franked yield of 5.1%, while Mermaid Marine’s yield of 5.6% is fully franked and, as a result, very impressive. This could prove to be hugely appealing while interest rates remain at a low ebb.

As a result of their impressive income potential, growth prospects and low valuations, Worleyparsons and Mermaid Marine appear to be well-worth buying at current price levels.

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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

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