2 rising small caps set to beat the FTSE 100

These two smaller companies have improving outlooks which may allow them to beat the FTSE 100 (INDEXFTSE:UKX).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While outperforming the FTSE 100 may sound less attractive given its high returns of recent months, beating the UK’s main index could still be a worthwhile goal. The outlook for the index remains relatively uncertain and seeking to generate a return in excess of tracker funds which follow the FTSE 100 may be a shrewd move. With that in mind, here are two shares which have already beaten the wider index since the start of the year. More outperformance could lie ahead.

Improving outlook

Reporting on Friday was radiation detection technology company Kromek (LSE: KMK). Its shares increased in price by over 8% following the update, which shows that investor sentiment continues to improve. This takes the company’s gain in 2017 to around 29% versus just 1.5% for the FTSE 100.

Kromek’s update stated that it is making good progress on the delivery of new orders won over the past two years. Due to this, it is continuing to trade in line with expectations. Its products have gained traction in all of its business segments from the increasing adoption of CZT-based technology and other products. More customer wins are expected in future, with Kromek anticipating a step change in revenue in the new financial year.

In fact, the company is expected to report a narrowing of the losses of recent years. Following a pre-tax loss of £4.1m in 2016, it is due to post a pre-tax loss of £3.7m in financial year 2017. This is then expected to narrow to a loss of £2.1m in financial year 2018. Given it has taken part in a successful fundraising and investor sentiment seems to be on the up, now could be the right time to buy a slice of the business.

Recovery potential

Also offering FTSE 100-beating performance is Judges Scientific (LSE: JDG). The scientific instrument business has experienced a difficult period of late, with its bottom line being highly volatile and causing its share price to disappoint somewhat. However, since the start of the year there has been an improvement in investor sentiment, with the company’s shares rising by 20% year-to-date.

Looking ahead, more growth could be on the horizon. Judges Scientific is expected to deliver a rise in its bottom line of 24% in the current year, followed by additional growth of 12% next year. Since investors are understandably somewhat cautious about its prospects owing to its disappointing profit falls in recent years, the company has a relatively wide margin of safety at the present time. It trades on a price-to-earnings growth (PEG) ratio of just 1.1, which indicates that it offers a favourable risk/reward ratio.

Of course, there is no guarantee that Judges Scientific will deliver on its upbeat forecasts. However, the company seems to have turned a corner and now has the right strategy through which to improve on its rising share price.

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 Judges Scientific. The Motley Fool UK has recommended Judges Scientific. 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.

More on Investing Articles

Investing For Beginners

4 actionable stock market investing habits that can boost my profits

Jon Smith looks at the stock market and explains how he picks the right shares to buy, running through a…

Read more »

Investing Articles

The Standard Chartered share price leaps on FY dividend and buyback news. Time to buy?

An 8% jump for a UK-listed bank on 2023 results? That's what just happened to the Standard Chartered share price.…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Can Lloyds shares get any cheaper?

Lloyds shares have fallen further following the release of the bank's 2023 results. This Fool senses now is a time…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

£7,000 of money to spare? Here’s how I’d aim to turn that into £1,000 in annual extra income

Christopher Ruane explains how he would aim to generate a four figure income to cushion his future, all with dividend…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Is this stellar dividend growth stock the only no-brainer buy on the entire FTSE 100?

Picking shares requires careful thought and analysis, but this FTSE 100 growth stock appears to be pressing all the right…

Read more »

Investing Articles

I bought 422 Glencore shares in July and 232 in September. Here’s what they’re worth now

Glencore shares have had a rough ride leaving Harvey Jones out of pocket. Should he cut his losses or average…

Read more »

Man smiling and working on laptop
Investing Articles

Here’s why I’m investing most of my savings in FTSE 100 shares!

I think investing in FTSE 100 shares is one of the best ways that UK investors can make long-term returns.…

Read more »

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »