3 Of My Favourite Small Caps: Judges Scientific PLC, AFC Energy plc & Boohoo.Com PLC

These 3 smaller companies seem to be well-worth buying: Judges Scientific PLC (LON: JDG), AFC Energy plc (LON: AFC) and Boohoo.Com PLC (LON: BOO).

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Shares in Judges Scientific (LSE: JDG) are down by 4.5% today after the scientific instruments specialist released an interim update. Although it expects to meet market expectations for the full-year, Judges Scientific is now guiding towards a year-on-year fall in its half-year earnings, with a build-up in its order book apparently causing organic revenue to be hit. However, it does expect an improved second half of the year, with the interim order book having been built up in recent months.

Clearly, this has disappointed many investors and, as such, it represents a superb buying opportunity for other investors. That’s because, while a fall in profitability is never welcome, it is only for a very short period of time (six months) and, encouragingly, the company’s management team expects growth for the full year to be in-line with previous guidance. This would equate to growth of 21% versus 2014, with further growth of 12% being pencilled in for next year.

And, with Judges Scientific continuing to make acquisitions (such as the recent purchase of Armfield), it could bolster its bottom line considerably over the medium to long term. Moreover, with a price to earnings growth (PEG) ratio of just 1.3, it appears to offer excellent value for money at the present time.

Similarly, online fashion retailer Boohoo.Com (LSE: BOO) also trades on a very appealing valuation. It has a PEG ratio of just 0.8, with its earnings set to rise by 42% this year and by a further 25% next year. As a result, investor sentiment could be positively catalysed and help to reverse the decline in the company’s share price that has seen it slump by 29% since the turn of the year.

Of course, it could be argued that Boohoo.Com is operating in an extremely competitive industry where margins could come under pressure. Certainly, the twentysomething and teenage fashion space has a large number of incumbents and is constantly evolving, which means that new entrants can quickly gain market share while existing operators are left behind. However, Boohoo.Com’s valuation appears to adequately take that risk into account and, with expansion across the globe being a key focus for the company over the medium term, now seems to be a great time to buy a slice of it.

It’s a similar story for alkaline battery producer AFC Energy (LSE: AFC). Its share price rise may put off a number of potential investors, with a gain of 468% since the turn of the year arguably indicating that it is due a pullback. And, while AFC Energy is not risk-free, it appears to have strong forward momentum, with a number of potential projects in the pipeline and the business moving into profitability in its interim results for the first time.

Importantly, AFC Energy is operating within a space that is set to grow significantly in future. Although the lower oil price may slow the pace of change away from fossil fuels and towards greener options, the use of fuel cells is likely to increase significantly in the next decade, which makes now a great time to buy a profitable business, such as AFC Energy, which operates in this arena.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of AFC Energy and Judges Scientific. 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.

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