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Is Now The Time To Buy Optimal Payments Plc, Jubilee Platinum PLC And Proactis Holdings Plc?

In today’s article, I ask whether Proactis Holdings (LSE: PHD), Optimal Payments (LSE: OPAY) and Jubilee Platinum (LSE: JLP) are a buy after recent gains.

Proactis Holdings

Shares in software company Proactis rose by as much as 8% to 102p today, after a strong set of results and news of a new deal with Screwfix.

Proactis, which has a market cap of around £35m, provides software to help control corporate spending by managing purchasing, invoicing and supplier relationships.

Last year’s sales were boosted by acquisitions, and revenue rose by 69% to £17.2m, while underlying organic sales growth was 12%.

Unlike many small-cap tech stocks, Proactis is profitable and even pays a dividend. Adjusted earnings per share rose by 126% to 6.1p last year, while the firm’s final dividend has risen by 9% to 1.2p, giving a yield of around 1.2%.

I was impressed to see that £14.3m (83%) of the firm’s revenue is now recurring. This suggests that most of the firm’s customers are on rolling subscriptions, which I like. A reported operating margin of 9.3% is also encouraging, while the firm’s cash and debt levels remain reasonable, with net cash of £1.5m.

Small companies like this can be expensive to buy and sell, due to the big spread between bid and offer prices. However, for long-term investors, I believe Proactis could be worth a closer look.

Jubilee Platinum

Shares in Jubilee have doubled over the last three months thanks to the sale of the firm’s Middelburg platinum smelter and power operations.

On 9 October, Jubilee received £5.4m cash for the sale of the Middelburg operations. This, along with cash from a placing and some new debt, should enable Jubilee to fund the development of its two platinum surface mining projects.

As things stand, recent shareholders are sitting on a decent profit, but I’m not sure the shares are still a buy.

Jubilee says that the firm’s surface mining and tailings projects offer “significant earnings potential”. But there are no broker forecasts for the firm. A presentation published in February suggesting that the two sites could generate operating cash flow of $14m per year was based on a platinum price of $1,250 per ounce. That’s 27% higher than today’s price of $980 per ounce.

In my view, it might be wise to wait for more detail on the economics and funding of the projects before deciding whether to invest.

Optimal Payments

Online payment processing company Optimal made waves in March when it agreed a $1.2bn deal to acquire Skrill, another, larger, digital payment firm.

The Skrill acquisition completed in August and Optimal shares have risen by 40% since July. The group’s first-half results showed that sales rose by 40% to $223m, before any contribution from Skrill.

Brokers are forecasting full-year sales, including a contribution from Skrill, of $582m, with a net profit of $93m. This puts the shares on a 2015 forecast P/E of 20, falling to about 15 in 2016, when net profit is expected to rise to $97.5m.

In my view, Optimal’s current valuation already reflects a fair amount of growth. I’m not sure now is the best time to buy — it might be worth waiting until we have a little more information about the combined firm’s trading.

A better alternative?

While I am bullish about the growth potential at Proactis Holdings, I believe that the firm featured in "1 Top Small-Cap Stock From The Motley Fool", could prove to be an even more profitable buy!

The company concerned performed strongly last year and recently issued a strong trading update.

The Motley Fool's top analysts believe shares in this company could be significantly undervalued.

The Top Small-Cap Stock report is completely FREE and carries no obligation.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.