The Motley Fool

Two small-cap growth stocks that could help you quit your job

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.

Champagne poured into a row of flutes
Image source: Getty Images.

While it’s relatively easy to make slow, steady, long-term gains in the stock market by investing in a broad selection of large, well-known companies, if you’re looking for life-changing gains, it can pay to invest a small proportion of your portfolio in fast-growing small-cap stocks that are a little more under the radar.

Today I’m looking at two companies that have delivered three-year gains of 170% and 330% respectively for investors. Are you seeing these kinds of gains in your portfolio?

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!

dotDigital

DotDigital (LSE: DOTD) is a company I have owned for several years now. I bought the shares back in 2013 for around 24p, and today they change hands for 95p, so I’ve made quite a decent profit. However, I won’t be selling just yet, as I believe there could be more gains to come in the medium-to-long term.

Founded in 1999, dotDigital is a leading provider of tools for digital marketing professionals. Its core product ‘dotmailer’ is a handy piece of software that enables clients to effortlessly construct marketing emails. It’s used by thousands of businesses, including Barbour, Screwfix and Crystal Palace Football Club.

While DOTD has experienced powerful growth in recent years, investors have been concerned this year that new General Data and Protection Regulation (GDPR) would derail the group’s growth. As a result, the shares have spent much of 2018 in a short-term downtrend.

However, it looks like these fears were overdone, as the company advised in a trading update last week that revenues for the year ended 30 June had grown approximately 35% to £43.1m with recurring revenue surging 41%, and that customer numbers had grown by 26% over the year. It also said that it had seen “no material impact” on either email volumes or recurring revenues from existing clients, following GDPR implementation. The shares have jumped 30% in less than a week after the update, putting an abrupt end to the downtrend.

Looking at these results, it’s clear that Dotdigital still has considerable momentum, and trading on a forward P/E ratio of 24, I think they still offer plenty of value. I’ll be holding on for higher profits.

Learning Technologies

Another small-cap technology stock that I have my eye on is Learning Technologies (LSE: LTG), which specialises in providing technology-driven workplace learning solutions.

With a client base that is becoming increasingly populated with national governments and blue-chip firms, the group has delivered some pretty impressive growth in recent years, with sales rising from £15m to £52m over the last three years alone. And City analysts expect this powerful growth to continue in the near term with sales of £101m anticipated this year, after the group recently completed the “transformational” acquisition of PeopleFluent Holdings, a leading provider of cloud-based integrated recruiting, talent management and compensation management solutions.

A trading update released this morning has confirmed that the firm’s financial performance for the six months to 30 June 2018 is “in line” with market expectations. Management advised that revenues for the period are expected to be at least £27.3m (excluding the recent acquisition of PeopleFluent), a rise of 27% on last year, with organic revenue on a constant currency, like-for-like basis increasing approximately 10%.

I like the long-term story here. However, the shares do look a little pricey at present, trading on a forward P/E of 44. As such, I’ll be keeping the stock on my watchlist for now.

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 dotDigital Group. The Motley Fool UK has recommended dotDigital Group. 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.