Two small-cap growth stocks I’d buy for the next decade

Here are two very different small-cap companies that really could boost your profits over the next decade.

| 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.

Shares in Accsys Technologies (LSE: AXS) have had a rocky time, though they’re up around 20% over the past 12 months to 78p. The uncertainty among investors is largely down to the fact that the company is not currently profitable — and the risk is added to by the company’s pioneering technology for producing a durable acetylated timber product.

But interim results released Wednesday make for encouraging reading, with the firm reporting a rise in revenue to €28.3m (against €25.1m in the same period last year).

Demand is apparently growing worldwide, and the company’s Accoya plant is running at full capacity to meet a 13% rise in sales volumes.

There are big questions over when we’ll be seeing first profits and whether Accsys has the liquidity to reach that target, but I’d say the balance is very much on the positive side now. Though debt did rise significantly from €5.7m to €23.1m, cash also grew during the period to €46.9m from €7.9m a year previously, thanks to funds raised for the expansion of the firm’s manufacturing plants.

Capacity expansion

And to that end, the company expects capacity at its Arnhem Accoya plant to grow by 50% early next year, and the construction of a new Tricoya plant is under way in Hull — sales of Tricoya panels are up by 24%.

Chief executive Paul Clegg said: “We continue to see good global demand for both Accoya and Tricoya in an important year for Accsys. We are making transformational changes to our manufacturing capacity to meet this demand, having secured significant support from shareholders and our industrial and financial partners.

That suggests Accsys really could be close to the point of profitability, and I’m warming to it despite my earlier bearishness.

Engineering startup

Van Elle Holdings (LSE: VANL) is something we don’t see in the UK every day — a startup engineering business. 

The company, which floated just over a year ago in October 2016, describes itself as a “geotechnical engineering contractor offering a wide range of ground engineering techniques and services to customers in a variety of UK construction end markets,” and produced a mixed set of results for the year to July 2017.

Though revenue and underlying EBITDA rose by 11.8% and 12.9% respectively, underlying earnings per share (EPS) came in flat with reported EPS down 19%. Operating cash conversion rose impressively from 79.6% to 91.9%, but return on capital employed dropped from 38% to 30.6%.

Yet Wednesday’s trading update gave cause for optimism, telling us that “trading in the first half of the financial year has been positive and the Board expects to report turnover of approximately £53m” — and that’s significantly better than the £43.1m recorded in the first half of 2016. Underlying pre-tax profit is expected to grow by 15%.

Low valuation

Van Elle hasn’t exactly pleased investors with its share price performance so far, but this latest update did give the shares a 9% boost on the day to 86p, and forecasts make the shares look like a bargain to me.

Theres no EPS growth predicted for this year (though I can see that changing now), and the shares are on a lowly P/E of seven — with a 13% boost to EPS on the cards for next year, that would drop to just over six. With dividend yields of 4.1% and 4.7% added to the mix, I’m seeing a long-term buy here.

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.

Alan Oscroft has no position in any of the 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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »