2 stocks you’ll brag about owning some day

Bilaal Mohamed reckons these two small-cap shares could be legends in the making.

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Let’s face it, as human beings we all like to brag about our achievements, especially if it means getting one up on the other guy (or gal). Deny it all you want, but as investors we’re no different to the rest of the population. We all feel a little smug when we’ve made the right call, especially when we’ve profited handsomely from our self-proclaimed wisdom.

Life’s a beach

That brings me nicely to On The Beach. I don’t mean literally on the beach, but the London-listed business more formally referred to as On The Beach Group plc (LSE: OTB). As you’ve probably guessed, the company specialises in short-haul beach holidays via its website www.onthebeach.co.uk.

From humble beginnings as a start-up business in 2004, On The Beach has graduated to becoming one of the UK’s largest online retailers of such holidays, with an approximate 20% market share of the online short haul market. Just two years on from its stock market debut, the group’s share price has more-than-doubled, with the Cheshire business now worth in excess of £500m. Now that’s something worth bragging about.

Global expansion

Its technology platform enables customers to dynamically package the individual components of their holiday (including flights, hotels and transfers) to build custom-made trips from millions of flight and hotel combinations, as opposed to being offered pre-packaged holidays, as is the case with many traditional tour operators.

Despite being a technology-led business, the group continues to invest in offline advertising in order to drive brand awareness and reduce its reliance on paid search activity, with the aim of increasing the level of repeat bookings. There are also plans to expand into markets outside the UK. Clearly there’s plenty of scope for further growth here.

A price-to-earnings ratio of 25 may seem a little steep, but with underlying profits forecast to rise by a further 71% by the end of financial year 2018, this falls to a more reasonable multiple of 19.

Environmental technology

Another small-cap firm that I believe could go on to bigger and better things is Porvair (LSE: PRV). With a market value of around £220m, the specialist filtration and environmental technology group is less than half the size of On The Beach, but I believe it has the potential to outperform its small-cap peer in the long run.

The Norfolk-based group develops, designs, and manufactures specialist filtration and separation equipment, serving a range of market segments of which aviation, energy and industrial process, laboratory supplies and molten metals are the most important.

Healthy order book

The group enjoys a very a healthy order book, with organic growth driven by new product introductions and capacity expansion. The business also boasts a strong balance sheet, as well as a promising project pipeline.

Trading on a forward price-to-earnings multiple of 25, Porvair offers steady and consistent long-term growth at a very reasonable 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.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of Porvair. 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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