The FTSE 100 is pushing all-time highs, but the UK small-cap index is still below where it was in 2021. Yes, the business environment hasn’t improved for small companies, but many firm will have matured nicely during that period… some appear a little overlooked.
So, is this a rare opportunity? Well, not really. That’s because the FTSE Small Cap index has actually been lower over the past three years. However, what I believe makes this opportunity unique is the fact that, in my view at least, small caps are now looking even cheaper relative to their FTSE 350 peers.
What’s more, I’d like to think investors’ attention may be drawn to the excellent opportunities within the small-cap market in the coming months. Why? Because blue-chip stocks are getting a little pricier. Let’s take a look at some of the shares that have caught my eye.
Opportunity knocks
The table below summarises the forward price-to-earnings (P/E) ratios, net debt or cash positions, and dividend yields for five potentially overlooked UK stocks. These are Card Factory, Yü Group, Celebrus, Keller Group, and Arbuthnot (LSE:ARBB) — through to the end of their respective forecast periods.
| Company | Year | P/E ratio | Net debt/cash (£m) | Dividend yield |
|---|---|---|---|---|
| Card Factory | 2026 | 6.2x | -£117 (debt) | 6% |
| 2027 | 5.6x | -£108 (debt) | 6.7% | |
| 2028 | 5.2x | -£78 (debt) | 7.2% | |
| Yü Group | 2026 | 7.2x | +£117 (cash) | 4.7% |
| 2027 | 6.8x | +£142 (cash) | 5% | |
| 2028 | N/A | +£165 (cash) | 5.3% | |
| Celebrus Tech | 2025 | 8.2x | +£20.1 (cash) | 2.1% |
| Keller Group | 2025 | 8.3x | -£30 (debt) | 3.4% |
| 2026 | 7.9x | -£10 (debt) | 3.5% | |
| 2027 | 7.6x | +£63 (cash) | 3.7% | |
| Arbuthnot Bank | 2025 | 7.3x | N/A | 5.6% |
| 2026 | 6.2x | N/A | 6.0% |
Across this group, Card Factory and Arbuthnot stand out for their low P/E ratios and high dividend yields, though Card Factory maintains moderate net debt. Yü Group and Keller both transition to strong net cash positions, supporting their rising dividends. Celebrus, while offering a lower yield, is backed by substantial net cash and trades at a modest multiple.
An easy comparison
Arbuthnot trades at a significant discount to FTSE 100 banks like Lloyds and NatWest, with a forward P/E of just 7.3 in 2025, falling to 6.2 in 2026 and 5.5 by 2027. This valuation gap is partly due to Arbuthnot’s smaller size, AIM listing, and more limited analyst coverage, which can result in lower liquidity and less investor attention.
Additionally, while Arbuthnot’s growth profile is strong, its earnings could be more volatile than those of its blue-chip peers, and its price-to-book ratio remains well below one, signalling the market’s cautious stance. However, this discount offers a margin of safety and potential for re-rating if profitability continues to improve.
It’s actually a stock I’ve bought and I believe it’s one that deserves broader consideration. And while some investors may prefer the relative safety of a larger banking stock, this one has a much lower loan-to-deposit ratio, indicating a fairly cautious approach.
