Should you buy Petra Diamonds Limited after a 15% jump today?

Petra Diamonds(LSE: PDL) saw its shares plummet by 65% from a peak in December last year, to 60p on 25 September.

But shareholders will be buoyed by a 15% price hike Thursday to reach a morning high of 83.75p. As I write, that's fallen back to 78p, but we're still looking at a gain of 30% in less than three days. So what's changing?

The company has been dogged by industrial action in South Africa, and a release on 29 September told us of ongoing disruption ahead of the finalisation of its new wage agreement. But the long-running issues should hopefully be coming to a close once this pay deal is completed.

Export stopped

Earlier this month, the export of a parcel of diamonds from the Williamson mine in Tanzania was blocked, and some personnel were being questioned by the authorities - and it's news on that front that seems to be behind the latest rebound.

As revealed Wednesday afternoon, authorisation to resume exports has been received, although the original blocked shipment has not been resolved, so there's still a problem. But it's not the potential catastrophe that could stem from a total block.

I really do think we could be looking at a decent upturn for Petra now, and that's a sentiment that appears to be shared by City analysts. After three years of falling earnings, which saw EPS plunge from 14.8 cents in 2014 to 5 cents for the year to June 2017, there's a big hike to more than 13 cents forecast for next year.

That would give us a P/E of only five, and I reckon that low valuation outweighs the remaining risks.

Another recovery

Shares in Balfour Beatty(LSE: BBY) also picked up this morning, gaining 7.5% to reach a peak of 277p.

The company has endured a few tough years of losses, and managed to turn in a pre-tax profit of only £8m in 2016 - though at least that was in positive territory, and it should be followed by a strong return to growth, if analysts are to be believed.

There's a 66% hike in EPS forecast for this year, followed by a further 61% in 2018. And the dividend that was halted in 2015 could be back to 2.3% by then.

August's first-half results back up these predictions, with underlying revenue up 8% to £4.2bn and underlying operating profit more than trebling to £39m. Meanwhile, the firm signalled its confidence by lifting the interim dividend by 33%, to only a modest 1.2p, but it's a start.

Confidence

Chief executive Leo Quinn added: "All of this gives us confidence that the Group remains on track to achieve industry-standard margins in the second half of 2018."

The construction industry was hit hard by the Brexit vote, but I think those fears are overdone with respect to the long term and that now is a good time to be thinking of buying.

I do, however, have two reservations over Balfour Beatty itself. Firstly, the company has a rather large pension deficit which could harm it if we don't see a strong earnings recovery over the next few years.

I'm also concerned by a forward P/E, on 2017 forecasts of a bit over 22. I'm just not sure if there's enough of a safety margin for me there, although I am pleased to see 2018 forecasts dropping it to around 14.

I'd wait for full-year results.

Another growth candidate

I reckon Petra Diamonds and Balfour Beatty both show strong earnings growth potential now, but I'd also like to introduce you to another top candidate.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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