Are Sirius Minerals plc, Iomart Group plc & CVS Group plc 3 must-have small-caps?

Should you pile into these 3 smaller companies right now? Sirius Minerals plc (LON: SXX), Iomart Group plc (LON: IOM) and CVS Group plc (LON: CVSG).

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2016 has been a rather disappointing year for investors in CVS Group (LSE: CVSG). That’s because the veterinary services provider has recorded a fall in its share price of 7% since the turn of the year. However, with its shares still being up by 24% in the last 12 months, recent performance could prove to be something of a blip due to wider market weakness and/or profit-taking.

Looking ahead, CVS is forecast to increase its bottom line by 27% this year and by a further 17% next year. This rate of growth, while strong, is not particularly unusual for CVS since it has recorded an annualised rate of earnings growth of just under 16% during the last five years. And with its shares trading on a price-to-earnings growth (PEG) ratio of only 1.3, they seem to offer upbeat growth numbers at a very appealing price. As such, CVS seems to be set to reverse its recent share price fall and remains a high quality smaller company for the long term.

Head in the clouds

Also recording a falling share price since the turn of the year is cloud computing and managed hosting specialist Iomart (LSE: IOM). Like CVS, however, Iomart’s share price has surged in recent years and despite falling by 2% since the start of the year it’s still up by 211% in the last five years.

Looking ahead, such a staggering rate of growth could be replicated since Iomart remains a high quality business with a very bright future. This is evidenced by the company’s earnings growth outlook, with Iomart expected to increase its bottom line by 23% in the current financial year and by a further 9% next year. This indicates that investor sentiment could pick up – especially when Iomart has a PEG ratio of just 1.6. Therefore, with Iomart continuing to produce an above average growth rate, it seems to be a worthwhile purchase at the present time.

Surprise surprise

While CVS and Iomart have fallen this year, shares in Sirius Minerals (LSE: SXX) have soared by 22%. This is somewhat surprising since 2015 was a fantastic year for the company and investor interest was exceptionally high as planning approval was granted for a major potash mine in Yorkshire. And after rising by 41% in 2015, it would have been unsurprising for Sirius Minerals’ shares to have come under a degree of pressure due to profit-taking.

However, investors seem to be even more excited about the company’s prospects now, even though the cost of the project is vast. While funding such a huge project may prove to be challenging – especially with investor sentiment towards the resources sector being somewhat lukewarm, Sirius Minerals has the potential to post high levels of profit in the long run. However, with a number of other resources sector companies offering rising profitability and a low share price, there seem to be better options on offer elsewhere.

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 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.

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