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Why I Would Cast Quindell PLC And Roxi Petroleum plc Adrift… But Load Up On Spirent Communications Plc

Today I am looking at whether these strong risers in Thursday trade are worthy of your consideration.

Quindell

Whatever you think of telematics provider Quindell (LSE: QPP), the business can never be accused of being boring. In what has proved to be a terrific start to the year the company’s share price has more than doubled since 1 January, and is up 14.6% in Thursday business alone.

Investor sentiment has been buoyed in recent days by news that hedge fund Toscafund Asset Management had hiked its holding in the firm to 5.4%. Still, in my opinion the market should not lose sight that Quindell lost around nine-tenths of its value in 2014 owing to a multitude of problems.

Although Quindell is undoubtedly a market leader in a hot growth sector, the company has failed to shore up confidence in what is going on behind the scenes at the firm. Several board members, including founder and chief executive Rob Terry, fell on their swords in November after selling millions of shares under a complicated sale-and-repurchase agreement, motivation for which is yet to be fully explained.

The cash situation has also long been a bone of contention with Quindell, and the firm advised this month that it is weighing up the sale of a number of assets to boost its capital pile, and has entered an exclusivity agreement with one third party. At this stage no one knows exactly what has prompted these decisions, let alone what a restructured Quindell could look like, and thus gauge its earnings potential.

And although Quindell said that it remains “comfortable” with its capitalisation, this is not the first time we have heard such overtures from the company. Indeed, PwC is in the process of running the rule over its books, a process which could reveal yet more nasties for the company’s investors.

Roxi Petroleum

Shares in oil exploration play Roxi Petroleum (LSE: RXP) were recently up 13% in Thursday business following news that it had sold off its 34.22% stake in the Galaz Contract Area, a move which could raise up to $28m for the company.

Roxi said that the deal will allow it to focus its attentions on its flagship BNG Contract Area in Kazakhstan, and could finance the drilling of at least four deep wells at the project.

Still, I believe that Roxi remains a high-risk gamble for investors. The firm’s latest operational update in December revealed that coil tubing equipment had become stuck at one of the wells at BNG, pushing back estimates for a 30-day well test until February. Investors are waiting with bated breath over what the final costs will be, not to mention when oil can start flowing from the well.

Allied to the prospect of further weakness in the black gold price — Bank of America noted just this week that Brent could hit $40 per barrel in the near future — I reckon that Roxi remains a dicey stock selection.

Spirent Communications

Communications testing specialists Spirent Communications (LSE: SPT) have leapt 10.5% today following a positive trading update. The business announced that fourth quarter revenues came in at the upper end of estimates of $120m-$125m, at $124m, a figure which represents a 7.5% year-on-year improvement.

And promisingly for future revenues, order intake during the period beat company estimates, with inflows surging 18% during October-December to $147m.

I believe that the firm is in a terrific position to benefit from surging ethernet and 3G/4G demand across the globe, sectors which City analysts expect to drive earnings at Spirent 37% and 18% higher in 2015 and 2016 respectively.

Allied to the firm’s bubbly acquisition strategy — Spirent hoovered up DAX, MobileThink and Radvision TBU during the second half of 2014 alone — I reckon that the business is in great shape to enjoy resplendent long-term bottom line growth.

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Royston Wild 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.