The Motley Fool

2 promising small-cap growth stocks worth watching in February

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.

Magnifying glass on charts
Image source: Getty Images.

With concerns over the health of the global economy spreading over the last few months (not to mention the perpetual ‘elephant in the room’ that is Brexit), searching for promising growth stocks feels decidedly contrarian at the moment. Nevertheless, I think it’s still worth doing, particularly if further wobbles in the markets help to bring the prices of such stocks down to more attractive entry points.  

Here are two minnows that I think are worth keeping an eye on in February. 

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!

Game on

£350m cap game developer and publisher Frontier Developments (LSE: FDEV) will report its interim financial results for the six months ended 30 November 2018 on 6 February. Based on this month’s trading update, management is likely to report “record” numbers thanks to the success of its third franchise — Jurassic World Evolution. 

The manage-your-own-dinosaur-park game has now sold in excess of 2 million units, most of which were downloaded rather than purchased from a shop. Elsewhere, Frontier’s other franchises, Elite Dangerous and Planet Coaster, “continue to perform well.

Revenue of roughly £64m for the six-month period was mentioned, which would be a staggering 236% improvement on that recorded the previous year. In addition to selling more games, Frontier’s strategy of providing free updates and additional content (at a price) as a way of keeping people interested in the titles would appear to be paying off.  

As far as the full-year is concerned, management remains “comfortable” with market expectations on revenue falling between £75m and £88m and believes this “should exceed the mid-point of this range“. 

Having more than halved in value in seven months, you might think Frontier’s stock trades on a tempting valuation. Unfortunately, it’s still far from cheap on a little less than 22 times forecast earnings. There are no dividends to speak of either, so those holding must pin all their hopes on capital growth for now.

Nevertheless. CEO David Braben’s promise to provide more information on the company’s fourth game franchise “in the coming months” could be a catalyst for the shares to move higher. The fact that less than 50% of the stock is actually available to the public could also accentuate any upside. 


Also worthy of further research, in my opinion, is small-cap infection-prevention, contamination control, and hygiene product manufacturer Tristel (LSE: TSTL). The company is due to release its interim results on 25 February. 

Based on comments made in December’s AGM, the small-cap expects to report pre-tax profit of “no less than” £2.2m for the first six months of its financial year (ending in June 2019) — 10% higher than in 2018. Importantly, this takes into account Tristel’s recent purchase of Benelux distributor Ecomed Group but only one month of the latter’s contribution to revenue and profits.  

Having climbed to as high as 342p last summer, the stock is now pretty much back to the price it was one year ago (275p). Like Frontier, however, Tristel is most definitely not a stock for value hunters.

A forecast price-to-earnings (P/E) ratio of 27 suggests a lot hinges on the company’s ability to build a presence in the US. The process of getting the necessary regulatory approval for its products is “progressing as planned“, according to CEO Paul Swinney,

Should approval be given, the upside could be huge. For now, however, you’ll need to pay a premium for a chance to enjoy that ride. 

Is this little-known company the next ‘Monster’ IPO?

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.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers 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.

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.