I’d buy this small-cap growth stock for my Stocks and Shares ISA now

I’m already planning my 2021 Stocks and Shares ISA, going mostly for income shares. But I could make room for this growth stock too.

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I mostly invest in dividend stocks these days, especially in my Stocks and Shares ISA. But the younger growth investor in me sometimes re-emerges when I see a tempting prospect. I think I see one now in Tracsis (LSE: TRCS). So what does it do?

The AIM-listed company provides software-based technology to the transport industry. And it seems to be a bit of a leader, with an enviable reputation. The company counts Network Rail and the Department of Transport (DoT), along with other government agencies, among its customers.

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AIM for a Stocks and Shares ISA?

Before I go further, I want to touch briefly on AIM, the Alternative Investment Market. Some investors will be wary, as it has looser regulation than the main LSE markets. That’s a boon to smaller companies due to lower costs, but AIM is also where too many dodgy firms over the years have ended up burning shareholders. In fact, in the early days, the rules didn’t even allow us to put AIM shares in a Stocks and Shares ISA.

Saying that, we can find some top growth shares on AIM too. Like ASOS with a market cap of more than £4bn. Couple that with a presumption that Tracsis will have had to live up to government standards to get the DoT contract, and I have no AIM-based fears.

Full-year results

So back to Tracsis, and its full-year results released Thursday. Revenue dipped slightly, to £48m from £49.2m. The firm reckons Covid-19 hit revenues to the tune of around £10m, mostly in the Traffic & Data Services division. That division includes large events and data collection projects within its remit, and many of those were canceled or postponed.

Adjusted EBITDA came in flat at £10.5m, but pre-tax profit did fall. We saw a drop from £6.6m in 2019 to £4.1m. Fully diluted earnings per share (EPS) fared better, with a modest dip from 27.42p to 23.66p. Tracsis ended the year with £17.9m in cash, so there doesn’t seem to be any liquidity problem. And liquidity is a key factor in my Stocks and Shares ISA choices.

The second half has obviously hit the company’s growth expectations. But at the halfway stage to the end of January, just weeks before the pandemic overwhelmed us, growth was strong. Revenue was up 41%, with adjusted EBITDA up 23%. I see that as underlying strength, which I value in a Stocks and Shares ISA.

Growth and dividends

With the coronavirus downturn in full swing, Tracsis wisely decided to defer its interim dividend pending later review. Well, there’s not going to be a dividend now.

But I think that’s fine. And I reckon there’s every reason to expect dividends to get back on track next year. It’s not a lot of cash to do without anyway, as the dividend had only been yielding 0.3%. So, not my typical Stocks and Shares ISA pick by a long way.

But even though the dividend has been modest, Tracsis has already implemented a progressive strategy. At this stage in a growth company’s life, I rate that as a very positive thing. I see Tracsis as a strong growth buy today, hopefully blossoming into a rewarding income stock in years to come.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and Tracsis. 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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