2 under-the-radar stocks I’d consider right now

Bilaal Mohamed looks at two often-overlooked stocks that could go on to deliver spectacular returns.

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Engineering and environmental consultancy group Ricardo (LSE: RCDO) this morning reported another solid year of progress, with a resilient performance and a record order book at the end of its most recent financial year.

Uniquely positioned

The group based in Shoreham-by-Sea, West Sussex, works across a range of market sectors including passenger cars, commercial vehicles, rail, defence, motorsport, energy, and environment, with a client list that includes transport operators, manufacturers, energy companies, financial institutions, and government agencies.

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Ricardo’s in-house engineering capabilities enable it to design and deliver high-quality prototypes and low-volume manufacturing of complex products and assemblies, including engines, transmissions, electric motors and generators, battery packs, and fuel cell systems.

Record order book

The company is uniquely positioned to handle the toughest strategic and operational challenges, with assignments that have included strategy development, cost reduction, safety management, regulatory compliance and environmental impact assessments.

Preliminary results for the full year ended 30 June revealed a 6% rise in total group revenues to £352.1m, compared to £332.4m the previous year, with underlying pre-tax profits in line with expectations at £38.3m. The financial year ended with another record closing order book at £248m, a 7% increase on the previous year.

Aston Martin

It was a particularly good year for the group’s Rail and Environmental consultancies, as well as its Performance Products business, which delivered its 10,000th engine to McLaren, and was selected to design and produce an advanced hypercar transmission for Aston Martin.

Ricardo’s shares have pulled back sharply since last year’s all-time highs, and now offer much better value trading at just 13 times earnings for the current fiscal year to June 2018.

Luxury car market

Carclo (LSE: CAR) is another specialist small-cap firm that’s no stranger to the luxury car market. I last looked at the technical plastic products supplier back in April when I rated the shares a buy. But after a mixed trading update, am I still bullish on the West Yorkshire business?

In its most recent update, Carclo revealed that overall trading for the current financial year to March 2018 remains in line with expectations, with strong trading at its LED Technologies division which provides lighting for top of the range luxury cars such as Aston Martin, Lamborghini and McLaren.

Technology-led

But the Technical Plastics division had a challenging start to the financial year with new programmes being delayed and some operational challenges, which have now been largely resolved. Performance is now much improved and should be considerably better in the second half.

Carclo’s share price has pulled back sharply since peaking in June, and I believe this presents investors with another opportunity to stake a claim in this exciting technology-led business. Trading on a forward P/E rating of less than 11, I think the shares are simply too cheap for bargain hunters to ignore.

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Bilaal Mohamed 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.

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