Small-cap shares on the London Stock Exchange have the potential to rise faster than larger peers due to being earlier in their growth journeys. Here are two that I reckon deserve closer attention from investors.
Riding the gold boom
Ramsdens (LSE:RFX) is a high street pawnbroker boasting four divisions: precious metals buying, jewellery retail, foreign currency exchange, and pawnbroking loans.
The company is benefitting from two trends that I expect to continue. The first is a rising gold price, with the yellow metal hitting new highs due to a number of factors, including stubborn inflation and global economic uncertainty.
In the six months to 31 March, a higher gold price sent gross profit in Ramsdens’ precious metals unit surging 53%. This helped pre-tax profit reach a record £6.1m, with more than £15m now expected for the full year.
The second trend is the cost-of-living crisis, which is forcing more people to sell jewellery and/or seek pawnbroking loans. Sadly, I see this getting worse, with tax rises and spending cuts now looking inevitable.
Ramsdens is focused on helping customers repay part of their loan if more time is necessary. It does this to not only act responsibly, but also to keep the door open for future borrowing when needed.
Now, one thing worth mentioning is that rival H&T has been snapped up by Firstcash to create the largest publicly traded pawnbroker in the US, Latin America, and UK. So, Ramsdens could face rising competition, as Firstcash has deeper pockets to invest in UK store expansion and marketing.
That said, Ramsdens is planning to open six to eight new shops each year, adding to its existing 169 stores. And its growing its online presence in both gold buying and jewellery selling, with dedicated websites attracting new customers.
The stock’s up 53% over the past year. Yet, a forward price-to-earnings (P/E) ratio of 10.7 still looks reasonable, while there’s a 4% dividend yield on offer.
Fast-growing fintech
The second small-cap is Beeks Financial Cloud (LSE:BKS), which rents out secure cloud servers to banks, brokers, and other financial companies. It provides low-latency hosting right next to major financial exchanges, enabling customers to trade faster.
When I first started digging into the company a few months ago, I was worried about competition. There are so many fintech innovators around these days, and this still adds risk, I feel.
However, Beeks is growing strongly, and recently signed a contract with crypto exchange Kraken. Just in August, it secured over $7m of new contracts for its Private Cloud platform.
These latest wins span financial institutions across different geographies, underpinning my confidence in Beeks’ growth prospects. It has also taken a strategic minority stake in Liquid-Markets-Solutions, a Swiss provider of ultra-fast network equipment for financial trading.
Encouragingly, Beeks is already profitable, and its forward P/E ratio of 24.8 is far from ridiculous for a growing fintech.
| Market cap | Expected revenue (FY2025) | |
|---|---|---|
| Ramsdens | £112m | £109m |
| Beeks Financial Cloud | £145m | £37.3m |
Foolish bottom line
To sum up, Ramsdens is a dividend-paying pawnbroker with a strong balance sheet that’s benefitting from the surging gold price.
Meanwhile, Beeks is an up-and-coming fintech growing quickly both domestically and abroad.
While small-caps can add risk, given their modest scale, I feel these two could ones to consider for those seeking a nice blend of high growth (Beeks) and steady income (Ramsdens).
