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Why Shares In Sprue Aegis PLC Jumped Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What:

Shares of AIM-traded Sprue added 26p to 258p earlier today, an 11% gain, after the home safety products company revised its guidance for 2014.

Since releasing a trading update for the six months to 30 June Sprue’s order book has grown markedly, driven by a large increase in smoke detector orders from France, and as such the board now anticipates full year results to beat expectations.

smoke-alarmSo what:

Sales grew by 11% to £24m in the half year, driven by strong demand for FireAngel smoke detectors in continental Europe. UK performance, meanwhile, was mired by fewer campaigns targeting awareness of carbon monoxide poisoning and destocking, but the newly bolstered order book will more than offset this.

Now what:

The balance sheet, as of 30 June, showed £12m of cash and no debt. Sprue shares trade at 23 times last year’s earnings which, factoring into account this morning’s upgraded earnings forecast, could fall to a P/E multiple below 17.

Investors can expect a further update on the company’s prospects at the time of the publication of its half year results to be announced on 22 September.

Despite today's gains, Sprue isn't our favourite growth opportunity. "The Motley Fool's Top Growth Stock For 2014" could double profits within four years and, unlike Sprue, it's trading at a steep discount.

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Mark Stones has no position in any shares mentioned. The Motley Fool 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.