Up over 40% in 6 months, these 2 stocks are marching on

Shares in structural steelwork company Severfield(LSE: SFR) and supply chain solutions provider Wincanton(LSE: WIN) have been moving up.

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At today's 82p share price, Severfield is up around 41% from the 58p or so the shares reached in late June. And at 257p, Wincanton sits around 49% higher than the 172p we saw the shares touch during early July.

These stocks are marching on, but why? Let's dig a little deeper to see if they can make decent investments from here.

A dividend explosion

Severfield's chief executive Ian Lawson was upbeat in the firm's interim results report released in November. He said a strong performance continued after the company's September half-year period with margins up and healthy cash-generation. He thinks profit growth for the full year will be ahead of previous expectations, and to underline the directors' confidence, the interim dividend was pushed up an impressive 40%.

Severfield's strategy targets an underlying doubling of profit before tax over the next four years and, judging by the interim report, it looks like the firm is on course to achieve that goal.

However, just four years ago its position didn't seem as rosy. Profits had collapsed and the firm tapped the market with a Rights Issue to pay down debt and fix its balance sheet. There's no doubt that the firm's operations are highly cyclical, but there could be more to come during the current upturn in operations.

Indeed, City analysts following Severfield anticipate the firm's earnings bounce-back to continue with earnings per share rising 14% during the year to march 2018 and by 12% to March 2019.

A return to dividends

Wincanton's interims were out in November too. The firm's chief executive, Adrian Colman, said that good trading during the first half of the year justified the reintroduction of a dividend payment at the end of the previous year and dividends would continue with an interim payment.

Dividend payments were last on the scene as far back as 2011, and one glance at the share price chart tells the story of the firm's volatile trading over recent years -- operating profit declined into loss as recently as 2012. Yet City analysts see progress ahead, predicting 4% uplifts in earnings per share for the years to March 2018 and March 2019.

More to come?

Companies with recovering operations such as these can be attractive as investments, but if I held their shares I would remain vigilant for approaching weakness in trading down the road.

Right now, you can pick up shares in Severfield for a forward price-to-earnings (P/E) ratio of just over 14 for the year to March 2018 and Wincanton's on a forward P/E rating of around nine. Severfield's forward dividend yield runs at 2.8% or so, and Wincanton's around 3.8%.

The valuations remain undemanding and the shares are on the move, but I think it's worth remembering these firms' troubled recent histories. If you're tempted to take the plunge, it might be a good idea to remain cautious while holding the shares.

Buy-and-hold investing

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Kevin Godbold 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.