2 minnows that turned £5,000 into £10,000 in just 1 year

Brain

I always approach AIM-listed stocks with extreme caution, and you should too. So many have promising futures, but with a treacherous journey ahead of them. These two minnows will have doubled your money over the past year, but that is no guarantee they will repeat the trick. Both published results this morning, so what does the future hold?

Brain stormer

Neuroscience digital health company Cambridge Cognition Holdings (LSE: COG) has a market cap of just £30.30m. It was slightly higher this morning, but the share price is down more than 8% after publication of its interims for the six months to 30 June. Cambridge operates in a risky area, developing and marketing software products to improve brain health, so investors should expect slips along the way.

Today’s results were in line with management expectations and showed a year-on-year dip in total revenues from £3.26m to £3.21m, and a loss before tax of £390,000, more than double last year’s £150,000. The loss per share tripled from 0.6p to 1.8p, but at least the cash balance has grown, from £1.38m to £1.82m.

Services smile

Cambridge has been working hard to broaden its revenue base to make it less reliant on one-off large contracts, two of which temporarily boosted revenues last year. Services offered the main area of revenue growth, up 57% on last year, which should bring more revenue stability and offset the 26.1% drop in software and 78.6% drop in hardware sales that now make up a shrinking proportion of earnings.

CEO Steven Powell highlighted a 7.4% rise in gross margins and said investment in the sales team boosted its sales order pipeline by 65% to record levels. “This shift to good quality, high margin and repeat business is a welcome move and one which will help to drive our recurring revenue, giving us greater visibility as we continue to build the business.”

City analysts are positive, predicting earnings per share growth of 57% this year rising to 109% in 2018. If they are right, today’s drop could be a buying opportunity, but as I said, approach with caution.

Our friend Elektron

Today’s half-year report to 31 July from cloud-based solutions specialist Elektron Technology (LSE: EKT) has enjoyed a warmer reception, with the share price up more than 5% at time of writing. The stock has doubled from around 7p to 15p since mid-May although with a market cap of just £28m, sudden movements in either direction can always happen.

Elektron has been boosted by growth in its internet of things business Checkit, including Tuesday’s news of a contract win worth more than £225,000 annually in recurring revenue, rising to £600,000. The star of today’s show was its Bulgin business, which reported a 7% rise in sales to £12.5m and a strengthened order book, up more than 20% year-on-year. 

Checkit out

Group revenue rose 3% to £15.3m with the net cash balance rising from £500,000 to £2m over the year. With a strengthened Bulgin order book and the continuing rollout of Checkit, the board expects an improved trading performance in the second half. Elektron may be risky given its size, but it is also one to watch.

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Harvey Jones has no position in any of the 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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Could these bargain small-cap stocks make you brilliantly rich?

Share price chart up arrow

Lighting systems supplier FW Thorpe (LSE: TFW) updated the market on Thursday morning with its full-year results.

Strong performance

The Worcestershire-based business revealed that trade of late has been improving. Despite ongoing competitive pressures of its road tunnel and street lighting business, the group is seeing excellent revenue and operating profit growth at its retail and display business Thorlux and Lightronics in the Netherlands, which continues to drive double digit growth for the group as a whole.

Annual revenues for the year to 30 June grew by 18.6% to £105.4m, following a particularly strong performance from its overseas operations. And this helped annual pre-tax profits to grow 12.8% to £18.4m and earnings per share to increase by 11.6% to 12.54p.

Meanwhile, cash and cash equivalents at the end of the year had risen to £24.7m from £18.3m a year earlier, paving the way for a 0.3p increase in the final dividend to 2.85p – and bringing the ordinary full-year dividend up from 3.75p in the previous year to 4.20p.

Bumper returns

Shareholders in lighting specialist have enjoyed bumper returns over the last couple of years as the firm moves on from its past troubles, but is there further room to run?

Going forward, Chairman Mike Allcock is cautious about the company’s outlook, as he warned investors that a repeat of this year’s performance will be difficult given “ongoing economic uncertainty from Brexit, government instability and exchange rate variations”.

FW Thorpe also sounds very much still in the market for acquisitions, although nothing seems imminent. “We continue to review options for further acquisitions. We have the financial capacity, so it could be said that it is easy to acquire, and there are indeed frequent options for us to review,” added Mr Allcock.

And from a valuation perspective, with shares in the company trading at 22 times next year’s expected earnings, things aren’t looking too demanding given the rapidly expanding bottom line.

Turnaround play

Elsewhere, Nigeria-focused small cap oil explorer Eland Oil & Gas (LSE: ELA) may be a better pick for investors looking for a turnaround play.

Eland recently reported a positive start to its Opuama-7 sidetrack operations, with production expected to ramp up to 5,900 barrels of oil a day by October. As increasing crude shipments flow to the market, the firm is on course to improve its cash position and deliver high potential rewards to its shareholders.

Following a successful equity raise earlier this year and growing operational cash flow, the company is set to deliver further progress with its pipeline of development assets. As such, City analysts expect the significant upside in its financial performance in the coming year, after a number of operational difficulties in recent years.

Its shares are up 31% year-to-date, but Eland still seems very attractively valued, with shares trading at a forward price-to-earnings ratio of 5.9, based on analysts’ 2017 forecasts.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of FW Thorpe. 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.

2 stunning stocks for growth and dividend-chasers

Growth

Miton Group (LSE: MGR) stepped back towards recent record peaks in Thursday trading following an upbeat response to latest trading numbers, the stock last 3% higher on the day.

The fund manager announced that assets under management clocked in at £3.35bn as of June, exploding from £2.54m at the same point in 2016. And net revenues grew 7.3% year-on-year during January-June, to £10.3m.

However, Miton advised that adjusted pre-tax profit fell to £2.9m in the six months, from £3.1m in the corresponding period last year. The bottom line slip was caused by “a write-back to share-based payments… arising from the forfeiture of awards,” which totalled £430,000.

Chief executive David Barron commented: “The group continues to deliver strong investment performance and net inflows. We have continued to streamline the business and have demonstrated the scalability of our operating platform.”

And in a further reassuring step Miton advised that “trading for the full year is expected to be at least in line with current market expectations,” citing Peel Hunt forecasts predicting adjusted profit of £4.6m.

On the up

With demand for its financial products continuing to grow at a healthy rate, City consensus is suggestive of a modest 4% earnings rise in 2017. And Miton’s bottom line is predicted to pick up the pace from next year, and a 20% rise is currently predicted for 2018.

A consequent forward P/E ratio 16.2 times may not be too much to excited to get about, but I believe the AIM stock’s dividend outlook certainly is.

Last year’s 1p per share reward is expected to rise to 1.1p in the present period. And this is predicted to rise again in 2018 to 1.4p. As a consequence, yields ring in at 2.7% and 3.5% for this year and next, and I expect dividends to keep detonating as business accelerates.

Blue-chip beauty

I am convinced RSA Insurance Group  (LSE: RSA) is another terrific stock selection for those seeking splendid earning and dividend expansion. And my faith is underpinned by bright broker forecasts.

The FTSE 100 star is expected to keep its recent run of double-digit earnings rises rolling with a 12% improvement in 2017. And an extra 18% rise is predicted for next year. This does not come as a surprise given that demand for RSA’s products continues to detonate — the company saw net written premiums expand 11% between January-June thanks to new business, improving client retention, as well as higher pricing and foreign exchange gains.

Current projections also make RSA terrific value on paper, the insurer’s forward P/E ratio of 14.2 times falling below the Footsie corresponding value of 15 times. And investors can bank on the firm’s progressive dividend policy to keep churning out brilliant yields too.

A payout of 21.6p per share is forecast for this year, resulting in a chunky 3.5% yield. And this leaps to 4.8% for 2018 thanks to a predicted 29.9p reward. With restructuring measures finally complete and underwriting performance picking up momentum, I reckon now is a great time for investors to pile into the financial giant.

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Royston Wild has no position in any of the 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.

Two high-growth small-cap stocks I’d buy today

Computer Keyboard

The London Stock Exchange is home to many exciting smaller companies that are growing at breakneck speed. Here’s a look at two such companies that I believe look attractive right now. 

Quixant

Headquartered in Cambridge, Quixant (LSE: QXT) designs and manufactures advanced hardware and software solutions for the global gaming industry. The company generated sales of $90m last year, and currently has a market capitalisation of just £288m.

Since listing on the AIM market in 2013 at an IPO price of 46p per share, the shares have delivered an incredible return of over 800%, and now trade at around 420p. Is it too late to buy into the growth story? No, in my view.

Interim results released this morning show that Quixant still has considerable momentum. Indeed, for the six months to June 30, group revenue surged 38% higher to $56.9m, and group EBITDA increased 74% to $10.1m. Fully diluted earnings per share for the half year came in at 11.05 cents.

The company announced back on July 24 that trading had been stronger than expected, and COO Jon Jayal this morning advised that he did not expect that level of trading to continue for the full year. He did, however, say: “We are clearly well placed to achieve market expectations for the full year. We therefore look forward to the remainder of the year and beyond with confidence.”

City analysts expect full-year earnings of 20 cents per share this time, which at the current share price and exchange rate, places the stock on a forward P/E ratio of 28.6. That’s a premium valuation, no doubt, but looks to be warranted in my view, given the company’s track record and growth prospects.

Clipper Logistics

Another company that has only been public for a few years is Clipper Logistics (LSE: CLG), which floated back in 2014 at an IPO price of 100p. Today, the shares trade just under 400p, a gain of nearly 300%.

Clipper sees itself as a “new breed” of logistics company, suited to the rapidly changing retail environment. The company employs over 3,900 people, and clients include John Lewis, Harvey Nichols, ASOS and New Look. Essentially a play on the shift to online shopping, Clipper should benefit as consumers move away from the high street and make more online purchases that require delivery.

The logistics specialist generated sales of £340m last year, up from £290m the year before, and earnings per share for the year rose an impressive 20.5% to 12.5p. That growth facilitated a dividend hike of 20% to 7.2p per share.

City analysts have pencilled in top-line growth of 17% this year, and a 30% rise in earnings per share to 16.1p. If the company can deliver on those estimates, the forward P/E ratio of 24.6 doesn’t look that unreasonable in my opinion. 

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Edward Sheldon 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.

Why I’d hold onto this FTSE 100 six-bagger for another five years

cash growth time

Finding companies whose performance justified a long-term hold isn’t always easy. Today, I’m going to consider two potential candidates for a long-term slot in your portfolio.

A turning point?

Small cap Accsys Technologies (LSE: AXS) doesn’t have any problems finding customers for its super-durable acetylated timber product, Accoya. Sales have grown from just €15m in 2012 to €56.5m last year.

Accsys estimates that Accoya now accounts for 12% of the UK joinery market. It’s also sold in a number of overseas markets.

Today’s AGM trading statement makes it clear that demand remains strong. Sales rose by 20% during the five months to 31 August. There are only two problems.

The first is that production is already running at maximum capacity. Chief executive Paul Clegg admitted today that “we are working with our customers in order to minimise the impact of this temporary capacity limitation.”

The company doesn’t expect the benefit of new capacity to be available until the start of the next financial year, in April 2018. So there could be some risk of losing trade to competitors.

Struggling to break even

The second problem is that Accsys is struggling to become profitable.

Sales rose by 7% to €56.5m last year, but gross profit fell by 21% to €14.4m due to factors including higher timber costs and lower licensing revenues. As a result of this decline, the group’s pre-tax loss increased from €0.4m to €4.4m.

The group expects margins to improve over time. But today’s statement made further mention of rising materials costs and said the company was “reviewing the implementation of a price increase”. It sounds to me like customers might be quite price sensitive. So if Accoya prices rise too far above standard timber, I suspect sales could fall.

Broker forecasts suggest the company will report a full-year loss for both 2017/18 and 2018/19. The shares currently trade on 1.8x sales. That looks fully priced to me. I suspect there will be cheaper opportunities to buy over the next 18 months.

A six bagger since 2006

When chief executive Richard Cousins took charge at FTSE 100 catering firm Compass Group (LSE: CPG) in May 2006, the firm’s shares traded for 236p. Today that figure is 1,580p. That means Cousins has delivered a 570% gain for shareholders in just over 11 years.

Unfortunately, he has decided to retire next year. Compass shares dropped 2% today following the news, but the handover to new boss Dominic Blakemore should be orderly. Blakemore is already very familiar with the business, as he was appointed its chief financial officer in 2012 and is currently chief operating officer for Europe.

Buy, sell, or hold?

Cousins’ sure-handed guidance has resulted in Compass shares becoming quite expensive. The stock currently trades on 22 times forecast earnings, with a prospective dividend yield of just 2.2%. So should investors take profits?

I don’t think so. Although there’s a risk that Compass stock may underperform for a while, the group’s fundamental appeal shouldn’t change. Return on capital employed has averaged 20% since 2011, during which time the dividend has grown by an average of 9% per year.

In my view, Compass is likely to remain a profitable stock to hold. I’d see any significant falls as a buying opportunity.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. 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.

2 surprising small-caps owned by Britain’s Warren Buffett

stock share prices paper

You only have to look at the funds run by asset manager Lindsell Train to see why Nick Train is known as ‘Britain’s Warren Buffett’. He owns relatively few stocks – 23 in the case of his UK Equity Fund – and they’re readily identifiable as Buffett-type businesses. FTSE 100 giants Diageo and Unilever are the top two holdings, each with a 10% weighting, while a smattering of overseas stocks, including Heineken and Buffett-backed Kraft Heinz, are in the same blue-chip mould.

Surprisingly, given the wide universe of megacaps available, Train’s concentrated portfolio includes two little AIM-listed companies. Even more surprising, one of them is a football club.

A flaky investment?

Train has been a long-term investor in Celtic (LSE: CCP), which released its annual results just after the market closed yesterday. The company reported a 74% rise in revenue to £91m and a jump in profit from £0.5m to £6.9m. With the shares currently trading at 131p, the business is valued at £123m and the P/E is 17.8 (or 24 on a fully diluted basis).

On the face of it, this looks expensive given Celtic’s bumper haul of domestic trophies last season and the fact that the results also reflect, as management admits, “the paramount importance to the company of participation in the group stages of the UEFA Champions League.” What about bad years? Isn’t a football club a flaky investment that’s sure to go wrong sooner or later?

Rare and valuable brands

Train has a fascinating take on the intrinsic value of Celtic, Juventus (held by his global fund), as well as New York-listed Manchester United, where he’s recently been “delighted” to pick up a block of shares from the owning Glazer family. He was previously a shareholder during its spell on the London Stock Exchange in the 1990s, making a return of 30 times his initial investment – the single best investment of his career, he’s said.

His take on these football clubs is that they’re among an elite with “deeply entrenched and storied franchises” that make them brands every bit as rare and valuable as, say, Diageo’s Johnnie Walker whisky. Train reckons that the exponential rise in the value of TV sporting rights is set to continue. He said recently: “It will not be long now before an internet giant bids against an incumbent football rights holder. The ramifications for traditional media companies will be massive, but through the turmoil we expect the value of strongly-franchised football clubs to rise.”

It’s an interesting view and I’m certainly reconsidering my aversion to the idea of investing in football clubs.

A rewarding pint

The other AIM-listed stock Train owns is pubs group Young & Co (LSE: YNGA). London-focused and the owner of many well-known hostelries, Train has every hope that the next quarter of a century will prove every bit as rewarding for shareholders as the last, telling the Telegraph a few years ago: “Its real estate is likely to offer protection against inflation while its focus on the capital means that shareholders get a ‘proxy’ participation in the growth and vitality of London.”

Again, this is not an obviously cheap stock on a P/E of 20.4 (at a share price of 1,357p), but the P/E comes down to a more reasonable 15.6 on Young’s non-voting shares (ticker YNGN) at 1,033p, which Train also holds.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo. 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.

These brilliant dividend stocks could be millionaire-makers

financial independence

IG Group (LSE: IGG) was trekking northwards again in Thursday business following the release of first quarter results, although arguably a 1% day-on-day rise fails to reflect the impressiveness of its latest trading numbers.

The spread betting player declared that, during the three months to August 31, “client numbers in the UK were, as expected, lower than in the equivalent quarter in the prior year due to the particularly strong new client inflow in the prior period reflecting the short-term trading opportunities created by the EU referendum in June 2016.”

Still, IG Group managed to print record revenues of £135.2m in the period, up 21% year-on-year. The FTSE 250 star also saw client numbers increase 9%, to 124,900, and revenues per client grew 11% in the quarter.

Bet on it

I can understand investor reluctance to pile in right now given the regulatory uncertainty hanging over spread betting operators. Indeed, IG Group announced today that “none of the recently announced regulatory changes have adversely impacted the business to date [although] the nature and timing of potential regulatory changes in the UK and some other key markets for the Group remain uncertain.”

And those seeking hot growth shares in particular may want to give the stock a wide berth right now with City analysts predicting bottom-line falls of 1% the years to May 2018 and 2019.

But those seeking abundant dividends need to give the company more than a passing glance, in my opinion. The business is anticipated to hike the full-year dividend from 32.3p per share in fiscal 2017 to 33.8p in the present period, and again to 34.7p next year. As a result, it boasts magnificent yields of 5.4% and 5.5% for this year and next.

While there is clearly some degree of uncertainty facing IG Group at present, I reckon a prospective P/E ratio of 13.7 times more than reflects this.

Clothes colossus

N Brown Group  (LSE: BWNG) is another London-listed stock expected to deliver better-than-average dividends in the immediate term and beyond.

Despite enduring many years of earnings losses, the affordable and niche (plus-size) clothes retailer has still managed to keep shareholder rewards locked at 14.23p per share. And City analysts do not expect this trend to cease just yet with an identical dividend forecast for the year to February 2018, as well as a 1% profits dip.

This estimated payout yields 4%, beating the average forward yield of 3.5% for Britain’s blue chips by a little distance. And with N Brown predicted to finally get earnings marching higher in fiscal 2019, the abacus bashers expect dividends to follow suit. A payout of 14.5p is presently predicted, pushing the yield to a very handsome 4.1%, and supported by an estimated 4% earnings improvement.

The JD Williams and SimplyBe brands owner saw sales increase 5.6% during the 13 weeks to June 3, according to its latest trading statement. The moves it has made to embrace e-commerce are clearly paying off in spades (online sales shot 16% higher in the period) and with rising inflation putting increasing pressure on shoppers’ purses, I fully expect demand for N Brown’s affordable fashion offer to keep flying.

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Royston Wild has no position in any of the 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.