This small-cap 12-bagger is completely trashing Sirius Minerals

Sirius Minerals plc (LON: SXX) has terrific prospects but do not let it blind you to opportunities elsewhere, says Harvey Jones.

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Yorkshire-based potash miner Sirius Minerals (LSE: SXX) continues to generate excitement among investors, including yours truly, but its popularity can overshadow exciting small-cap opportunities elsewhere. One of them is IG Design Group (LSE: IGR), whose share price is up a whopping 1,332% over five years.

Design for life

Over the same period, Sirius Minerals is up a meagre 28%. Yet which generates all the clicks and column inches? Our polyhalite pals Sirius. In the meantime, IG Design Group has got on with making early investors brilliantly rich. Good on ’em.

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Good on my colleague Roland Head too, the first Fool writer to highlight this opportunity back in 2015, when it traded under the name International Greetings. He said this “boring-sounding firm makes boring products like wrapping paper, gift tags and stationery but it hasn’t been dull for shareholders”, adding that I wouldn’t bet against further gains over the next year or two. How right he was.

Meet and greet

IG Design Group still does the same old boring stuff, and a jolly good thing too. Earlier this month, it posted record annual profits and revenues with strong performance across the US, Europe and Australia. Even the stricken UK returned to growth, with management bucking the national mood by seeing growth opportunities in bricks and mortar retailers, as well as online.

Pre-tax profit increased 51% to £19.7m, while the total dividend jumped 33% to 6p per share. It currently yields 1.5% and with cover of 3.5, management has scope for further double-digit progression. IG Design may look a little expensive at 19.4 times earnings but rapid growth justifies that valuation. City earnings forecasts remain positive, predicting 21% growth in the year to 31 March 2019, then another 9% to 2020. Past performance is no guarantee, but if you have not met this £311m stock AIM-listed stock before – greetings!

Mineral wealth

Sirius Minerals meanwhile needs no introduction but it does need explanation. The share price continues to progress in fits and starts, its performance chart marked by sudden spikes upwards, followed by equally dramatic sudden spikes in the opposite direction.

My best advice is do not invest at the top as you will get buried by the rush of profit-takers. Aim to buy when it is in the doldrums, and news flow is thin. Today it trades at 33p although some claim its share price could hit 60p this year. It might be an opportunity.

The long-term story remains strong for the £1.56bn FTSE 250 stock, and that is what you must focus on. It continues to sign new contracts for its planned fertiliser production, securing binding agreements for 4.7m tonnes a year, lifting it tantalisingly close to the 6m or 7m its needs to secure second stage financing.

Do not underestimate the risks. Chairman Russell Scrimshaw is looking for taxpayers to guarantee £1.44bn of debt, something he says is “essential” for the mine to succeed.

The City is forecasting a £23.55m loss this year, down from £79.25m in 2017, with no profits expected until at least 2022. Any delay, or government reluctance to help, could knock the stock. Remember, buy when it’s down, not up.

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Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

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Harvey Jones owns shares in Sirius Minerals. 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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