The Motley Fool

Two hot small-cap stocks you need to check out today

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.

Dots over the earth connecting the world
Image source: Getty Images.

If you’re looking for fast gains in the stock market, it pays to look outside the FTSE 100. The UK is home to a number of really exciting small-cap companies, many of which are generating sensational returns for investors. Here’s a look at two companies you can’t afford to ignore.


Formerly known as ACAL, £301m market cap Discoverie (LSE: DSCV) designs, manufactures and distributes customised electronic products and solutions to businesses across a range of industries. Since I last covered the stock in mid-October, it has risen over 20%. In a year, it’s surged over 60%. The trend here is clearly up. Are there more gains to come?

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

A trading update released today sounds good, in my view, even if the stock has fallen a few percent this morning. The group advised that, since its last update on 31 January, trading has continued well, with full-year earnings likely to be in line with management expectations, reflecting “strong growth in year-on-year profitability.

Group sales for the year ending 31 March increased 11% on a constant currency basis, including organic growth of 6%. The Design & Manufacturing division, which generates around 75% of the group’s profits, enjoyed organic sales growth of 11% for the year. The firm advised that group gross margin “continues to strengthen,” and that the order book at 31 March was at a record £122m, 12% higher than last year.

Despite the rise in the share price over the last year, Discoverie’s valuation remains attractive. City analysts expect the group to generate earnings of 24.9p per share this year, which places the stock on a forward-looking P/E ratio of 16.3. A P/E to growth ratio (PEG) of 1.4 suggests that’s a fair price to pay for the growth being generated. Furthermore, a prospective dividend yield of just over 2% adds weight to the investment case. I rate Discoverie as a ‘buy’ at current levels.

First Derivatives

Another hot small-cap stock that investors can’t afford to ignore is big data specialist First Derivatives (LSE: FDP).

Big data refers to the vast amounts of data that businesses generate on a day-to-day basis. Processed and analysed appropriately, it can provide businesses with valuable insights that can improve efficiency and boost profitability. With data volumes growing at an exponential rate, big data is big business, and with its proprietary Kx data analysis software, First Derivatives looks well placed to capitalise. The firm has a long history of working with some of the world’s largest financial institutions, yet is now branching out to others sectors. In February, it signed a deal with a FTSE 100 gaming company to provide data analytics services. The opportunities here are vast. Is now the time to buy the shares?

First Derivatives had a sensational run last year, rising around 100%. When I last covered the stock in late January, I noted that it looked a little expensive on a forward P/E of 64, and said that it might be worth waiting for a pullback. That call was good, as the stock recently fell around 20% from its January high. However, the share price has since stabilised, and I believe it could now be time to take a closer look. The shares are still expensive, on a forward P/E of 49.7, yet the long-term potential here is significant.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Edward Sheldon owns shares in First Derivatives. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.