Never mind the FTSE 100. These small-cap UK shares are on fire!

The UK’s top-tier index has had a good past 12 months. But our writer has found three UK shares from lower down the market spectrum that put this performance to shame.

| More on:

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.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A lot has been made of the near-9% rise in the value of the FTSE 100 in the last year. However, this gain pales in comparison to the sort of return I could have earned if I’d had the foresight (or good fortune) to invest in certain small-cap UK shares.

Warpaint London

Specialist cosmetics supplier, Warpaint London (LSE: W7L) is one example. Its shares have been in glorious form — moving 130% higher in the last 12 months.

This move isn’t unwarranted. In April, the company reported a 40% jump in full-year sales to almost £90m in 2023. Pre-tax profit rocketed by 136% to just over £18m. The firm’s finances are also in fine fettle with no debt on the balance sheet.

Should you invest £1,000 in Mcbride Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Mcbride Plc made the list?

See the 6 stocks

Then again, I do need to remember that smaller company stocks tend to be volatile. As evidence of this, Warpaint shares roughly halved in price back in 2018. I fancy even the most risk-tolerant investor would have struggled to hold their nerve back then.

Created with Highcharts 11.4.3Warpaint London Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Another thing to be aware of is that this stock is no longer cheap. In fact, I’d need to stump up the equivalent of 24 times forecast FY24 earnings to get involved. That’s more than I’d like to pay.

For now, I’m keeping Warpaint on my watchlist in the hope that there’s some profit-taking around the corner.

Yu Group

Another small-cap stock that’s done the business for investors is Yu Group (LSE: YU). Shares in the independent gas and electricity supplier to the corporate sector have gained a stonking 170%.

Again, this can be justified. The company managed to grow its latest revenue by 65% to £460m. Pre-tax profit came in at £37.7m. That’s an increase of 580%!

Created with Highcharts 11.4.3Yü Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Can this continue? There’s an argument for saying that many UK stocks are still undervalued relative to other markets (such as the US). A price-to-earnings (P/E) ratio of just 10 suggests Yu could be one of them.

More specifically, management estimates it still only has a 1.4% share of a “£50bn+ addressable business-to-business energy supply market“. With a forward order book of £826m, I reckon there could be further share price growth ahead.

But note that Yu has no control of energy prices. So, that’s a risk I’d need to bear in mind when cash becomes available to invest.

McBride

A final UK share that’s smashed the FTSE 100 is McBride (LSE: MCB). The manufacturer of cleaning products has delivered a staggering gain of over 330% thanks to ongoing, excellent sales momentum.

In its last update on 30 April management reflected that “strong operational performance” and “continued high demand levels” had led trading in March and April to be ahead of its own expectations. Full-year adjusted operating profit would now be roughly 10% ahead of analyst projections at the time of reporting.

Created with Highcharts 11.4.3McBride Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Despite this, the shares still trade on forward P/E of just five! What gives?

Well, there are a few potential issues. First, the company has already highlighted that certain materials it uses are rising in price. Supply chain risks due to “geopolitical tensions” remain as well.

The biggest concern for me, however, is the massive debt pile (which is now far exceeds the company’s actual value).

I’d want to see this fall considerably before diving in.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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 assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Warpaint London Plc. 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.

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »