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Why I’d consider buying this small cap monster growth stock today

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Sustainable investment specialist Impax Asset Management Group (LSE: IPX) has seen its stock surge an impressive 270% to 185p in the past three years. It is also up 4.79% this morning after posting interim results for the six months to 31 March, which included a 51% increase in assets under management to £11bn, including £2.9bn from its completed acquisition of Pax World Funds.

Sudden Impax

Impax was further boosted by reported total net client inflows of more than £1bn, predominantly from clients in continental Europe and North America. First-half revenues almost doubled from £13.9m to £25.7m, with profits before tax up from £2.4m to £5.5m. Adjusted earnings per share jumped from 1.94p to 4.83p, a rise of 248%. This allowed Impax management to hike its interim dividend 57% to 1.1p per share. It is also paying a special dividend of 2.6p due to the “outstanding performance” of its second private equity infrastructure fund.

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The group hopes to benefit from the shift to a more sustainable global economy but must also deliver a robust investment performance, and has fared reasonably well. Its thematic environmental and resource efficiency strategies outperformed their sector benchmarks while slightly lagging the MSCI All Country World Index, and its global equity strategy outperformed.

Sustainable yield

Investors are happy and City analysts are forecasting 67% earnings per share (EPS) growth for the full year to 30 September, followed by 9% the year after. This fund management minnow, which has a market cap of £242m, also offers a forecast yield of 2.5%, with cover of 2.9.

My colleague Rupert Hargreaves reckons that if you buy today, you will be getting 4.8% by 2021. Its current forecast valuation of 16.5 times earnings does not seem excessive, especially if current momentum proves sustainable.

Pass the portal

Nine out 10 homebuyers start their search online but traditional estate agents have mixed feelings. They set up their own rival in January 2015, OnTheMarket.com (LSE: OTMP), to challenge the Rightmove and Zoopla “duopoly” and fight back against rising portal charges. The AIM-listed enterprise is now the third-largest portal in terms of traffic, and is giving itself a competitive edge by offering “new and exclusive” property listings.

Today’s final results for the year to January 2018 showed average branch numbers listed dipping from 6,306 in 2017 to 5,694, while visits fell from 85m to 77.3m. However, branch numbers and visits are now moving in the right direction. As of May 25 it has signed up agents with more than 8,500 branches, while traffic for the first four months of the current financial year almost doubled to 42.2m from 21.9m. It is also chasing former customers for unpaid fees after they quit the portal, usually after breaking its restrictive rule that their adverts may also appear on either Rightmove or Zoopla, but not both.

Market mover

The group described this as a “transformative year” and this is an early stage business that is still trying to find its footing. Group revenue fell from £17.8m to £16m, with an operating loss of £10.8m (up from £1.2m in 2017), which includes £14.7m of exceptional items. Shareholders took a £12.1m hit after tax.

Cash reserves did increase over the year to £3.2m but establishing itself is proving costly. The £98m company’s stock is down 1.23% on these results and I would urge caution. Rightmove is still the undisputed number one in this sector.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. 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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