This dynamic small-cap is thrashing Sirius Minerals

Why I think this small-cap could be a better bet than Sirius minerals plc (LON: SXX).

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If you are holding shares in Sirius Minerals  (LSE: SXX) your ‘buy’ could have caught the August 2016 peak, which would leave you down around 12% at today’s 38p share price. If you’d waited until March 2017 and bought around 17p you’d be up around 120%. But if you’d bought shares in medical and data communication products provider BATM Advanced Communications   (LSE: BVC) in August 2016 instead, you’d be up around 142% today, which thrashes the return from Sirius Minerals.

Powered by news flow

News flow keeps powering the Sirius Minerals share price. The latest is that an expanded partnership agreement has been signed with Archer Daniels Midland Company, the £22bn US agri-business listed in the Fortune 500, which is an annual list of America’s 500 largest companies by revenue. Sirius will buy binder from Archer Daniels for its Poly4 polyhalite fertiliser product and Archer Daniels will buy Poly4 from Sirius and be its North American off-take partner.

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The agreement suggests that Archer Daniels will be a crucial cog in the wheel of production as Sirius extracts polyhalite from its Woodsmith Mine, crushes and grinds it and granulates the resulting powder using starch binder under a patented process. Chief executive of Sirius Chris Fraser said in the news release that the agreement demonstrates “the significant role POLY4 will play in the world fertiliser markets.” 

Pre-committed customers keep piling up and all Sirius has to do now is complete the building and development of its mine and all the infrastructure in North Yorkshire. But I think the share price could wiggle around a fair bit before the mine is ready for production so I’m in no hurry to buy into the story by taking a position in the stock.

Storming towards profitability

Meanwhile, BATM Advanced Communications delivered encouraging interim results today. Revenue rose almost 17% compared to the equivalent period last year and the adjusted operating loss decreased to $0.6m from $1.4m the year before. That translated to an earnings per share loss of 0.35c compared to 0.66c the year before. It seems that the firm is storming towards sustainable profitability, which puts it several steps ahead of Sirius Minerals and explains the big share price rise we’ve seen over the last couple of years.

Some 51% of revenue came from the firm’s bio-medical division and the other 49% from the networking and cyber division. Chief executive Dr Zvi Marom said in the report: “In the first half of 2018 we’ve seen sustained momentum in all our areas of activity.” Indeed, robust design and development activity seems to have powered the good financial numbers and the firm has a higher order book than it had a year ago.Both divisions are seeing increasing demand for newly-launched products and solutions “as well as significant interest in those soon-to-be launched that are undergoing development.”

The directors are confident of hitting previous expectations and anticipate growth ahead. City analysts following the firm have revenue growth of around 5.4% pencilled in for 2019 and a strong move toward a positive earnings per share figure. I think the growth story emerging is well worth following with a view to buying some of the company’s shares.

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Kevin Godbold 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.

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 considered, so you should consider taking independent financial advice.

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