Why did the Renishaw (RSW) share price jump 10% on Thursday?

The Renishaw (LSE: RSW) share price spiked upwards Thursday morning, climbing 12% by midday. It easily led the FTSE 250, with second-placed Vivo Energy (LSE: VVO) gaining 4.5% on the back of a positive Q3 update.

For Renishaw, impressive gains in the first quarter did the trick. The company, which describes itself as a “global provider of manufacturing technologies, analytical instruments and medical devices“, posted a 35% rise in revenue. Total revenue reached £157.8m, with the bulk of that coming from its manufacturing technologies business.

The firm’s smaller analytical instruments and medical devices business only accounted for £9.3m in revenue. But that represented a 63% jump over the same period in 2020.

Renishaw reported adjusted profit before tax of £41.7m for the quarter, more than double the £18.3m recorded a year previously. That’s just one quarter, though, and last year’s adjusted figure looked a bit low to me. Still, it’s impressive, and I’m not surprised to see the Renishaw share price climb in response.

At 30 September, the company had net cash and bank deposits of £234.8m, so there’s a healthy cash position here. But would I buy?

Renishaw share price valuation

Before I checked Renishaw’s price-to-earnings ratio, I expected something high. And based on last year’s earnings per share, the current Renishaw share price represents a multiple of 39. That’s after the shares have fallen 13% in the past 12 months, and I can’t help thinking there was a bit of overvaluation a year ago.

The company had a tough year in 2020, so this is something of a recovery situation too. I don’t know enough about Renishaw right now to decide whether to buy. I will wait until I see how the first half works out, with interim results due in February.

Second biggest climber

What’s so good about Vivo Energy’s Q3 update that it has sent the stock up 4.5%? In this case, we’re looking at a company that’s a fair bit easier to understand. Vivo Energy sells Shell-branded fuels and lubricants in 23 African countries. Its business includes aviation and marine fuel, and it runs more than 2,300 service stations.

The quarter brought in a 3% rise in volumes, with a 4% increase in gross cash profit. Over a nine-month period, volumes increased by 7% while gross cash profit rose by 19%. As well as the higher volumes, the rise in profit is also due to improving margins. Moving into the fourth quarter, Viva says it is “beginning to see improvements in the Aviation and Marine segment“.

The company beat its targets by opening 114 new sites over the nine months, ahead of previous expectations in the range of 90-110 sites. It now expects to have opened 130-140 new sites by the end of the year.

Valuation again

This all sounds good, and I can understand the share price rise in response. But I’m back to the same question again, of whether I should buy. Again, it comes down to valuation. This time, it’s tricky, as 2020 was a poor year with some damage from Covid-19.

Going on 2019 EPS, the current Vivo price gives us a P/E of 13.5. If earnings should come in ahead this year, that could be an attractive valuation. Vivo Energy shares are up 39% over the past 12 months, but they’re still down 12% over two years.

I think there could be more to come here, but I’ll wait for full-year results.