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Over the past year, shares in Numis Corporation (LSE: NUM) have smashed the market returning 27%, excluding dividends, against the FTSE 100 return of 7.7%. At the time of writing, the shares currently support a dividend yield of 4%, so after including this distribution, the return for the year will likely exceed 30%. 

But can this financial services business continue on its current trajectory? 

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Buy ahead of further growth? 

Even though Numis is a relatively young business, the firm recently toppled JPMorgan Cazenove from its long-held position as the most popular stockbroker in the City. Numis has grabbed market share as bigger banks have focused on more significant corporate clients. 

Since 2010, Numis has added a net of about 70 clients to its books compared to JPMorgan Cazenove’s client roster that has fallen by nearly a quarter from 253.

Market share growth has helped Numis grow, but the firm’s profits are ultimately dependant upon market conditions. Pre-tax profit has roughly doubled during the past five years thanks to buoyant markets, but analysts are expecting earnings to slide next year by 19%, amid mixed markets. Even though the group reported pre-tax profit growth of 18% for the fiscal year ending 30 September, first half profits slumped 38% year-on-year. 

If markets remain buoyant, next year could be another of growth for Numis but, as yet, it’s impossible to tell. 

Still, I believe that the company has what it takes to continue to grow over the long term, no matter what the market environment. With net cash of nearly £100m, the shares trade at a cash-adjusted forward P/E of 10.2, according to my figures. 

Charging ahead

Numis isn’t the only small-cap growth stock that’s attracted my attention for its potential. Shares in filtration business Porvair (LSE: PRV) have surged by nearly 200%, excluding dividends, since the end of 2013. 

This performance has left the stock trading at a premium multiple of 25.2 times forward earnings, although this is a multiple I believe is entirely deserved. 

Porvair is a highly specialised business, which means it has a unique position in the market. Management is using cash generation to reinvest, buying bolt-on acquisitions, such as Dutch group Rohasys BV just last week. This particular deal brings robotic sample handling expertise to the group, enhancing its bioscience sample preparation capabilities.  

As well as these deals, strong organic growth is helping the company. In a recent trading update, management announced that earnings for the year to 30 November are expected to be ahead of forecasts with overall underlying revenue growth of 13%. 

If Porvair can continue to grow earnings organically while reinvesting in its business, in my view there’s no reason why the shares can’t head higher while maintaining their high multiple. There’s also scope for significant dividend growth as the payout of 4.1p is covered 4.5 times by earnings per share. 

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of Porvair. 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.

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