Are AFC Energy plc, Smiths Group plc & Devro plc Set To Soar?

Today’s update from alkaline fuel cell producer AFC Energy (LSE: AFC) is positive and shows that the company is moving in the right direction. That’s because AFC has signed a heads of agreement with an unnamed global manufacturing company which will cover the procurement and manufacturing of AFC’s fuel cell systems. Although the final terms are yet to be agreed and negotiations will take place over the coming months, the update indicates that interest in the fuel cell space remains strong.

Despite this, shares in AFC are down by 2.5% today, although they are still up by 230% since the turn of the year. And, with the company’s recent updates showing that it remains on-track to meet its target of 1GW of power generation in place or under development by 2020, it could prove to be a strong performer over the medium to long term. Certainly, there is a risk of disappointing news flow, but with interest in cleaner power generation being strong, AFC could continue its excellent performance year-to-date and may be of interest for less risk averse investors.

Meanwhile, shares in diversified technology and engineering company Smiths Group (LSE: SMIN) are up by over 10% today after a positive trading update. The company remains on-track to meet its full-year guidance despite a challenging oil and gas sector hurting performance in its John Crane division.

The reason for its double-digit share price growth, though, is a change in the value of its pension scheme, with the company’s free cash flow due to be boosted by £36m per annum as a result of a fall of £250m in the actuarial deficit of the scheme.

Looking ahead, Smiths Group is forecast to post a fall in its bottom line of around 8% in the current year. While disappointing, this appears to have been fully factored in by the market, since the company trades on a price to earnings (P/E) ratio of just 12.8. And, with it yielding 3.9% from a dividend which is covered twice by profit, Smiths Group appears to be a sound income as well as value play.

Also reporting today was food producer Devro (LSE: DVO). It remains on-track to deliver on its full-year guidance, with the company being forecast to post an impressive rise in net profit of 19% in the current financial year. And, with investment in new facilities in China and the USA progressing well, the company’s long term growth outlook is relatively strong.

However, with Devro’s shares trading on a P/E ratio of 17.9, much of this growth appears to be priced in. Furthermore, with earnings due to rise by just 1% next year, its share price could come under pressure in the near term. Therefore, and while it has a bright long-term future, it may be prudent to wait for a more appealing share price before buying a slice of Devro.

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Peter Stephens owns shares of AFC Energy and Smiths Group. The Motley Fool UK owns shares of and has recommended Devro. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.