Can shareholders in embattled engineering services company Worleyparsons Limited (ASX: WOR) finally catch a break?
The stock jumped over 1% to $10.15 in lunch time trade on expectations that it will bounce in the short-term as valuations have become too good to resist.
That's the assessment of Morgan Stanley, which has offered the stock up as a tactical buying idea as it believes Worleyparsons will outrun the broader market in the next 60 days.
The stock certainly doesn't look expensive after it shed a third of its value over the past 12 months, which puts it on a consensus 2015-16 price-earnings (P/E) multiple of around 10 times, or a 40% discount to its five-year average.
We are already seeing signs of some bargain hunters pouncing on the best quality engineering contractors, such as Monadelphous Group Limited (ASX: MND) with the stock surging 6.9% to a four-and-a-half-month high of $12.12.
Worleyparsons, which focuses on providing services to the energy sector, fits the bill as one of the better regarded contractors due to its good track record in turning over projects.
The company is also more immune from suffering devastating cost blowouts that led to the demise of Forge Group as it doesn't work on fixed-price contracts.
Despite the potential upside, Worleyparsons is not for the faint hearted. The widely fluctuating oil price has curbed demand for its services and as my colleague Sean O'Neill wrote today, depressed oil prices are likely to stay.
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