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Why Ekf Diagnostics Holding PLC, Computacenter plc And Serco Group plc Are Rising Today

Troubled outsourcer Serco Group (LSE: SRP) is rising today after analysts at investment bank Credit Suisse lifted their recommendation on the company’s shares to neutral from underperform. The bank’s analysts also raised their price target on the company’s shares from 142p to 208p. 

While this is a welcome relief for Serco’s shareholders, the company is still in dire trouble. Indeed, the company is still planning to conduct a refinancing and rights issue at some point in the next month or so as it looks to bolster its weak balance sheet. 

However, the group has started to recover from some of the accusations made against it last year. For example, the City of London Police recently found that the company wasn’t guilty of misleading the taxpayer over prisoner transfer contracts. The company has also won a contract to continue providing Australian immigration services. 

So, Serco is starting to recover but the company still has a long way to go.

Capital return  

Computacenter (LSE: CCC) has jumped by as much as 13% today after the company completed a return of capital to shareholders. Shareholders on the register as of 19 February will receive 71.9p existing ordinary share, equivalent to approximately £100m or around 11.2% of Computacenter’s current market capitalisation. The shares have jumped on a capital reorganisation. 

If you’ve missed Computacenter’s special payout, there’s no reason to worry. The company has a history of returning capital to shareholders. Computacenter’s dividend yield is set to hit 4.8% this year and the payout is growing at a double-digit rate every year. Additionally, even after returning £100m to investors, according to my figures, Computacenter has large net cash balance. So, I wouldn’t rule out further special payouts. 

Maiden profit 

Lastly, Ekf Diagnostics (LSE: EKF) has jumped by 10% today as investors position themselves ahead of the company’s full-year 2014 results. EKF will announce its preliminary results for the year ended 31 December 2014 on 16 March 2015 and the market is expecting the group to unveil its maiden profit. 

According to Ekf’s latest trading update, management expects 2014’s figures to be at the higher end of previous management guidance. Unaudited revenues of around £40.1m, a 26% improvement on the previous year, are expected. City analysts are expecting a pre-tax profit of £1.8m for the period and earnings per share of 0.34p. 

Based on these figures, the company is currently trading at a forward P/E of 54. However, based on the fact that Ekf’s earnings per share are set to jump by more than 140% net year, this premium valuaion is justifiable.

Nevertheless, if you are thinking about buying Ekf, you need to be prepared for volatility -- this is a high-risk/high-reward company, not suitable for widows and orphans. 

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Rupert Hargreaves 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.