Should you buy these two 10%+ movers?

Are these two stocks ripe for investment as their shares head upwards?

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Two of today’s biggest gainers are beauty products specialist Swallowfield (LSE: SWL) and communications solutions company Sepura (LSE: SEPU). The former is up by 10% and Sepura has been up by as much as 11% today. Looking ahead, both stocks could continue to rise at a rapid rate over the medium-to-long term.

Swallowfield

Swallowfield’s shares have moved higher today despite the company not releasing any significant news. The most recent update from the company was in September when it reported an upbeat set of results. Its sales moved over 10% higher following a year of major product launches for global brands, as well as significant product innovation and new business contract wins.

Looking ahead, Swallowfield’s growth prospects are very bright. It will make use of its expertise in areas such as aerosols and hot pour technology to boost volume and reputational value in delivering major products for household name global brands. Additional new business wins are also on the cards.

This is expected to produce a rise in earnings of 17% in the current financial year. Despite this strong growth outlook, Swallowfield continues to offer excellent value for money. For example, it trades on a price-to-earnings growth (PEG) ratio of 0.7. This shows that further gains could lie ahead.

Additionally, Swallowfield offers bright income prospects. Although it currently yields just 1.8%, dividends are covered four times by profit and this shows that rapid dividend increases may be on the horizon.

Sepura

Sepura’s shares are up after the company announced a major new contract win. Sepura has been selected by a large continental European public safety organisation to provide 19,000 SC20 series hand-portable radios. The contract builds on Sepura’s strength in the public safety market and shows that its current strategy is improving the company’s overall performance.

Sepura’s outlook is rather mixed. Although its profitability is due to fall significantly in the current year, next year is expected to represent a major step forward for the business. Sepura is forecast to increase its pre-tax profit from £0.4m in the current year to £11.6m in the next financial year. This step change in profitability has the potential to boost investor sentiment in Sepura and could cause its share price to rise.

Furthermore, Sepura offers excellent value for money. It trades on a forward price-to-earnings (P/E) ratio of just 6.1. This shows that even if its bottom line performance is lower than that currently anticipated by the market, Sepura has a sufficiently wide margin of safety to merit investment for the long term.

In terms of dividends, Sepura isn’t expected to make any shareholder payouts in either the current year or next year. However, for growth investors Sepura has real appeal and alongside Swallowfield, the gains made thus far today could continue over the coming months and years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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