Leading broker slaps a buy rating on Worleyparsons Limited shares: Should you buy?

It certainly has been a great couple of days for the Worleyparsons Limited (ASX: WOR) share price.

The mining services company’s shares have rallied a whopping 14% to a two-year high of $12.70 since the release of an investor presentation on Wednesday.

Although the presentation was reasonably light on detail regarding its current performance, management’s belief that the energy and resources industry has reached an inflection point appears to have caught the eye of investors.

According to the presentation, Worleyparsons’ customers are indicating a return to capex and opex growth. This is great news for the company and could be a sign that the cycle is turning.

Analysts at Deutsche Bank certainly appear to believe it is. A research note out of the investment bank this morning reveals that its analysts have upgraded Worleyparsons’ shares from a hold rating to a buy with a $13.73 price target.

Deutsche anticipates the company delivering earnings growth of 21% per annum for the next couple of years.

Should you invest?

Conditions in the industry do look to be very promising for Worleyparsons right now. I think this could potentially make it a great option for investors looking to gain exposure to the resources sector.

However, I would suggest investors limit any investment to just a small part of their portfolio.

Should the cycle not turn as predicted, then the shares of Worleyparsons and its peers Downer EDI Limited (ASX: DOW), Matrix Composites & Engineering Limited (ASX: MCE), Neptune Marine Services Ltd (ASX: NMS), and Monadelphous Group Limited (ASX: MND) could come under significant selling pressure.

If resources shares are too risky for you then I would suggest you consider an investment in one of these high-flying blue-chip shares. I'm tipping them for big things this year.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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