Can Communisis plc and Nanoco Group plc keep shooting higher?

Royston Wild considers the investment potential of Thursday surgers Communisis plc (LON: CMS) and Nanoco Group plc (LON: NANO).

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Marketing mammoth Communisis (LSE: CMS) saw its share price detonate in Thursday business following exciting contract news.

The stock has given back some ground after hitting seven-and-a-half month highs earlier today, but Communisis remains 4% higher from Wednesday’s close.

The firm — which provides marketing and communication services across a variety of channels — announced that it had been awarded a contract to provide all outbound customer communication for Her Majesty’s Revenue and Customs (HMRC).

The deal, which runs for an initial three years from mid-2017 with a two-year extension option, is deemed a significant one as HMRC sends out a staggering 185m letters every year. Communisis added that the contract “also includes the deployment of document composition technology.”

HMRC joins the long list of large private and public sector entities that rely on Communisis’s marketing expertise, the small cap also counting blue chips like Barclays, Legal & General and Centrica amongst its many clients.

And Communisis is investing huge sums to expanding its global footprint and bolster its relationships with the world’s largest companies as well as to attract new custom. The firm now sources around a quarter of total sales from foreign marketplaces, up from 18% at the mid-point of 2015.

Communisis is expected to follow a 13% earnings advance in 2016 with a 6% rise in 2017. This results in a P/E ratio of just 6.5 times, well below the ‘bargain basement’ watermark of 10 times. Meanwhile, a predicted 2.5p per share dividend for next year yields a market-smashing 6.1%.

I believe these figures provide plenty of scope for Communisis’s share price to keep on charging.

Screen star surges

Like Communisis, quantum dot manufacturer Nanoco (LSE: NANO) has also seen its share price shoot higher on Thursday. And an 8% rise has taken the stock away from recent 11-month nadirs.

The Manchester-based business announced that production partner Wah Hong, which produces Nanoco’s CFQD Fine Color film for use in televisions, is planning to ramp up production prior to the product’s unveiling at the CES consumer electronics show in Las Vegas next month.

Nanoco advised that “based on high market demand and rapid progress to date, Wah Hong has decided to bring forward by 12 months its planned investment in a further film coating production line.”

The new line is expected to be operational by the second quarter of calendar year 2017 and will allow Wah Hong to supply film for display screens of up to 100 inches,” the company added.

And Nanoco provided further cheer by advising that its own production and supply processes had received ISO 9001:2015 certification, a development the firm describes as “significant as it provides reassurance to both major and specialist customers that the company’s quality systems are robust.”

Nanoco’s high-tech products clearly have huge growth potential, and the business is making all the right moves to bolster its manufacturing base and service this strong demand.

Having said that, Nanoco has been knocking around for some time now and is still yet to generate profits growth. And the City does not expect the firm to snap into the black just yet, with losses of 3.1p per share chalked in for the period to July 2017.

I reckon Nanoco may be an unsuitable stock pick for less-patient investors.

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 considered so you should consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Centrica. 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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