3 small-cap growth stocks I’d buy in March

What’s coming up in March? How about these three possibilities?

Media success

Shares in XLMedia (LSE: XLM) have multiplied in value around 2.7 times since the end of 2014, to 109p today, yet they’re still trading on a relatively undemanding P/E multiple of 11.6 — which is significantly below the long-term FTSE 100 average of around 14.

Forecasts make this look like an attractive growth proposition, with a 17% rise in EPS pencilled in for the year just ended in December 2016, followed by two more years of growth that would drop the P/E to 9.4 by 2018 and give us a PEG ratio of an attractive 0.6. What’s more, there are well-covered dividends to be had too, expected to yield 5.1% in 2017 and 5.9% in 2018.

Results for 2016 are due on 7 March, and a trading update in January boasted of “another year of strong trading with significant growth set to continue“. The company, which bills itself as a “leading provider of digital performance marketing services“, announced a 15% rise in revenue to $103m with EBIDTA up 21% to at least $34.5m — those are, apparently, record figures.

XLMedia is also bucking the trend in publishing with that part of its business contributing to revenue growth, and to me it adds up to a very tempting proposition.

Building materials

Forterra (LSE: FORT) makes bricks, concrete and other building products, and its share price was somewhat bizarrely hammered by the Brexit vote last June. But if you’d taken advantage of the madness and bought during the crash, you’d now be sitting on a profit of 75%.

At 195p today, the shares are trading on a forward P/E of only 8.6 while expected to offer a tasty dividend yield of 4.6% — and those figures would improve to 7.8 and 5.2% respectively by 2018, if forecasts prove accurate.

Demand towards the end of 2016 remained strong, we were told in January, with brick sales ahead of the previous year, and there should be no surprises when 2016 results are revealed on 15 March.

There is some debt on the books, which slightly moderates the attraction of Forterra’s apparent low valuation, with net debt at the end of 2016 standing at approximately £93m. Compared to a market cap of around £440m, though, that’s actually not a big figure, and strong cash flow has apparently helped get the net debt to adjusted EBITDA ratio down to 1.5 — I’d like to see it come down some more, but I’m happy.

Internet of things

Yes, that buzzword. It’s apparently part of what Fusionex International (LSE: FXI) does, and the City’s analysts are expecting it to help deliver profits for the software specialist. But the shares have lost 80% of their value in the past three years, as reality hasn’t quite lived up to early promise just yet.

Results for the year to September 2016 won’t be with us until 15 March, with the firm only having appointed Stifel Nicolaus Europe as nominated advisor (or Nomad, an AIM requirement) and joint broker this month, and that delay could be making people twitchy.

Growth is expected to soar from 2017, and the shares’ predicted 2016 P/E of 71 should drop as low as 11 if forecasts come off. That would make the shares look very attractive today, though the combination of AIM, a new Nomad and the uncertainty surrounding the firm’s technology could be a little off-putting. Still, with a bit of in-depth research, I could see Fusionex as a tempting speculative buy.

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Alan Oscroft 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.