Penny shares, by their very nature, look temptingly priced. It’s easy to imagine a stock multiplying in value over a short period of time if it can be snapped up for mere pocket change. Even so, I think it pays to be extra cautious when hunting for winners. Here are three companies that, based on traditional investing metrics, look good value to me. But are they really?

Renold 

I can currently buy shares in industrial chain supplier Renold (LSE: RNO) for just nine times earnings. That already looks a potential bargain given that the company’s customers are nicely diversified by sector and geography. However, this minnow also has a PEG (price/earnings-to-growth) ratio of 0.5. As a rule of thumb, anything at or below 1.0 tends to imply value based on that firm’s prospects. 

Recent results go some way to supporting this. Earlier this month, the company announced that it was continuing to see a recovery in revenues and orders following the pandemic. The latter rose 61.3% to almost £80m over the four months to the end of July. As such, RNO now predicts it will beat market expectations for full-year adjusted operating profit. 

This is not to say that an investment in this penny share is risk-free. The “much-lengthened supply chains” and “considerable raw material and transport cost inflation” mentioned in the last update could get worse before they get better. Even so, I reckon Renold is a cautious buy for my portfolio today.

Severfield

Severfield (LSE: SFR) produces about 300,000 tonnes of fabricated steelwork a year from its five UK sites and factory in India. This is eventually used in the construction of landmark buildings, stadiums, warehouses, hospitals and universities. London’s Shard and Wimbledon’s No.1 Court are examples. 

Right now, I can buy the shares for 11 times earnings. That compares favourably to valuations both within its industry and the market as a whole. The company also has a PEG ratio of just under 1.0. 

Then again, it’s worth me bearing in mind that demand for Severfield’s steel will clearly be linked to the overall health of the UK economy. It’s also worth noting that this has been a penny share for over nine years now. As such, I doubt this stock will fly anytime soon.

Still, it does offer a secure and decent dividend yield (3.7%). So, as a way of balancing out my more racy growth plays, Severfield appeals to me. 

Gem Diamonds

Diamond explorer and producer Gem Diamonds (LSE: GEMD) is a final penny share that, using traditional valuation measures, looks dirt cheap. It has a price-to-earnings (P/E) ratio of less than six for the current year. Other things I like are the net cash position and 3.8% dividend yield.

Then again, this low valuation isn’t a complete surprise. After all, any company in the mining sector has the potential to be highly volatile in price due to the cost and difficulty of extracting whatever metal or mineral it’s focused on. This is potentially compounded by where in the world drilling is taking place.

To be fair, GEMD digs in Botswana and Lesotho, which are considered to be generally safe. However, other risks include the growing popularity of synthetic diamonds among younger buyers.

So, while I like some of what I see here, I’m content to leave Gem Diamonds to those with stronger stomachs.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Back then, the share had been moving up and it looked like we would enjoy a prolonged cyclical recovery from the stock with ongoing rises in the share price and the dividend. Indeed, the dividend has risen around 23% over the past two and a half years. The share price, however, is down just over 13%.

Volatility assured

Over the period, adjusted earnings have been moving up, and cash flow from operations has been grinding down. Overall, we’ve seen a lacklustre outcome since my previous article.

In January 2017, operations were recovering after the firm’s Rights Issue four years earlier. The re-financing was necessary because profits had collapsed and Severfield needed to pay off its debts to fix the balance sheet. The steel business is highly cyclical and a plunge in earnings, dividends and the share price is normal every so often for this type of company.

But sometimes owning shares like this during the cyclical up-leg can prove to be lucrative. However, the performance of Severfield’s shares since January 2017 proves how difficult it can be to time the cyclicals.

A mixed bag of financial figures

Today’s full-year-results report to 31 March reveals revenue was essentially flat compared to the previous year and underlying earnings per share rose 5%. But cash flow from operations dropped by 23%. Meanwhile, cash and equivalents on the balance sheet fell by 25%. But the firm used a lot of cash to pay dividends, including a special payment of 1.7p per share, on top of the ordinary dividend for the previous year.

There’s no special dividend payment this year, although the directors pushed up the total ordinary dividend by 8%. Indeed, chief executive Alan Dunsmore sounds upbeat in the report. The order book is up, and he explained it “contains a healthy mix of projects across a diverse range of sectors and we have made strategic progress in the UK, Europe and India.”

Everything looks rosy, but…

Dunsmore reckons there’s “considerable” momentum in operations which provides a “platform for further operational and strategic progress.” But I’m cautious. With cyclical firms, the storm often follows the heatwave. Just when everything looks rosy in the garden is when cyclicals are at their most dangerous for shareholders, in my view.

I’m mindful of the recent example of Kier Group and my cautious article about that firm when everything looked promising back in September 2017. Sadly, I was right to be worried about Kier.

Meanwhile, the lack of recent progress for Severfield’s shares strikes me as a negative sign. I think I’d be nuts to try to make this one a long-term hold, and it seems to me that the up-leg trade could have failed. I’m avoiding the share.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

But a Lifetime ISA could be the best ISA option there is, with its bonus of up to £1,000 per year added by the government. I’ve previously explained how the Lifetime ISA works, but beware. If you take money out early, you’ll be stung with a financial penalty of more than the government’s bonus cash.

But if really want to invest for your retirement, a Lifetime ISA could be a very nice thing — though time could be running out.

Given the meagre returns from cash ISAs, I reckon shares are the only way to go. And I prefer “buy and forget” shares, with a combination of solid dividends, growth potential, and a nice margin of safety.

Out of favour

Those criteria throw up recruitment specialist SThree (LSE: STHR), whose earnings have been flat for a couple of years in the current tough economic environment. That’s led to a freeze on the dividend, which will have turned away some investors, and the share price has dipped over the past month.

But I see an overlooked bargain, as analysts are predicting earnings growth this year and next. The falling share price has pushed the predicted 2018 dividend yields up to 4.6%, with 4.8% on the cards for next year, too. And we’re looking at a strengthening of cover by earnings, reaching 2.2 times on 2019 forecasts.

I think the combination of earnings growth, assuming forecasters are correct, coupled with a well-covered dividend that looks set to start rising again in the fairly short term, gives us a reasonable safety margin here. I also see forward P/E multiples of only around 10 as indicating good value.

Big debt could ruin the picture, but a net figure of just £24m at 31 August is nothing for a company with annual turnover of around £1bn.

SThree has been buying up its own shares with surplus cash, so it clearly sees them as good value. I agree.

Overlooked growth

I also now like the look of Severfield (LSE: SFR), whose shares have been out of favour for good reason. 

The structural steel engineer went through a bad patch a few years ago and needed a big rights issue to keep itself afloat. But the turnaround looks to have been a success and earnings per share have been recovering strongly for the past few years. Dividends have risen too, and are expected to yield 4% this year, and 4.4% next — with cover reaching 2.4 times by March 2020, according to forecasts.

Those same forecasts value the shares at about 10 times earnings, which is cheaper than the FTSE 100’s long-term average of around 14. With dividend yields around the current Footsie average, that might seem fair when allowing for post-recovery sentiment that will surely still be a little uncertain.

But what sways any doubt I might have is Severfield’s cash position. Instead of the debt we might expect a company in its position to be carrying, Severfield boasted £33m in net cash at 31 March.

These two need further investigation, but I see attractive long-term prospects for both.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With the stock seemingly in freefall, though, many investors may wonder if an even higher yield could be obtained over the medium term. After all, the company’s problems don’t seem to have gone away. As such, could BT offer income appeal right now? Or should investors look to another high-yielding stock that released a positive update on Wednesday?

Uncertainty

Perhaps one word can best summarise the outlook for BT at the present time: uncertain. The company is making huge changes to its business model and management at a time when the quad play sector is also evolving.

For example, it’s set to have a new senior management team in place by the end of the year, is in the process of delivering further changes to its structure after a prolonged period of restructuring, while competition within pay-tv, mobile and sports rights continues to increase.

As a result, it’s difficult to ascertain how the company will perform over the medium term. New management teams often seek to make changes and this could lead to current forecasts being changed dramatically over the coming months. As such, buying the company now could prove to be a risky move – especially for investors who are seeking a high-income return.

Clearly, if the BT share price continues to move lower, its dividend yield will rise. Given its continued downward trend, a fall of 25% so that it trades at 160p per share would not be a shock to investors. In such a scenario it would yield 10% if dividends are not cut. As a result, and while it may eventually have income appeal, it seems to be a stock to avoid at the present time.

Improving prospects

While BT may lack income-investing potential, another stock with a high dividend yield reported positive results on Wednesday. Structural steel company Severfield (LSE: SFR) saw revenue grow by 5% to £274.2m in the full year to 31 March, with underlying profit before tax rising by 19% to £23.5m. Its strong cash performance meant that year-end net funds were up to £33m, while dividends per share moved 13% higher.

The company currently has a dividend yield of 3.6%. While lower than a number of FTSE stocks, it’s forecast to post a rise in dividends of 11% in the next financial year. And with dividends being covered 2.4 times by profit, there seems to be scope for further growth over the medium term.

With Severfield forecast to grow its bottom line by 10% next year, it seems to be performing well from a business perspective. Its price-to-earnings growth (PEG) ratio of 1.2 suggests that it could also offer capital growth potential alongside its impressive income returns.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Structural steel group Severfield (LSE: SFR) is a useful barometer of the state of the UK economy. It produces steel for buildings, bridges and even stadium roofs. If orders dry up, then we might need to start worrying about a slowdown.

Happily, there’s no sign of this yet. The company said today that full-year profits should be in line with expectations, which were upgraded in November. Market conditions appear to be stable as the group’s UK order book of £242m is almost unchanged since November’s £245m.

Management say that these figures are “in line with our normal order book levels” and reported a balanced mix of demand across “all key market sectors”.

A risk in India

This company also has a second division, which operates in India. Conditions here are also said to be good, but I think it’s worth noting that the order book has fallen from £79m to £65m since the start of November.

If this trend continues it could become a concern, but for now I’m prepared to trust management guidance that the business is delivering a “good operational performance”.

I’d keep buying

Today’s update suggests to me that short-term growth may be limited. But Severfield has taken big steps to improve its profit margins and strengthen its balance sheet over the last couple of years.

Looking ahead, the stock trades on a forecast P/E of 11 with a prospective yield of 3.5%. If market conditions remain stable I’d expect another round of growth over the next year or two. In the meantime, I’d be happy to keep buying at this level.

Boring but very profitable

Engineering firm Hill & Smith Holdings (LSE: HILS) makes “engineered products for the roads and utilities markets”. These include products such as crash barriers, street lights, steel ladders, gratings and much more. Other customers include the energy and chemicals sectors.

A wide mix of customers and operating countries helps to smooth out peaks and troughs in demand. But what really makes this business special is that many of the group’s products have to meet demanding specifications and safety standards. This means that it’s not easy for competitors to enter the market.

Strong figures

This defensive moat makes the business surprisingly profitable. The group’s underlying operating margin rose from 13.1% to 13.9% last year, while return on capital increased from 14.3% to 18.4%.

Hill & Smith is continuing to expand through regular small acquisitions, but strong cash generation means that this hasn’t resulted in high debt levels. Net debt was just £99m at the end of last year, which looks comfortable to me when compared to operating profit of £74.1m.

A dividend hero?

Hill & Smith’s quality is no secret. The company’s share price has risen by 85% over the last three years as investors have bought into the group’s success. One particular appeal is the firm’s dividend, which has risen from 4.2p per share in 2002 to 30p per share today.

The stock currently trades on 17 times forecast earnings with a prospective yield of 2.5%. Although this isn’t cheap, I believe it’s a fair price for a quality long-term stock. I’d be happy to buy today and average down during market dips.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

One is Severfield (LSE: SFR), which has gone through several partial name changes in its history. The structural steel company suffered a tough patch and recorded a few years of losses, but since returning to positive (although very low) earnings per share in 2014, all the signs have been of an impressive recovery.

After a strong year to March 2017, forecasts suggest further growth in earnings for the current year together with steadily rising (and well covered) dividends, and Tuesday’s interim results supported that nicely.

The share price gained 11% to 71.5p after the company reported a 59% rise in underlying pre-tax profit to £12.9m, after revenue grew by 16%. Underlying basic EPS came in 56% ahead at 3.5p, and the first-half dividend was hiked by 29% to 0.9p.

Outlook getting better

Crucially, the firm reported a continuing strong cash performance, leaving it with net funds of £31.4m at 30 September (from £32.6m in March, but after paying some debts.)

With strong order books in both its UK and Indian markets, full-year results are apparently “expected to be comfortably ahead of previous expectations.”

We’re now looking at a modest forward P/E of under 12 based on current forecasts, and that will surely fall when they’re upgraded after the latest results.

The firm’s progressive dividend is tipped to yield 3.5% this year and 3.8% next. Looks like a buy to me.

Stunning growth

My next subject is a classic growth stock in the shape of Scapa Group (LSE: SCPA), whose shares have seven-bagged over the past five years, to 470p as I write — with the firm bringing in double-digit rises in earnings per share for years.

And though dividend yields are still low, they’re nicely progressive and we could be looking at a long-term cash cow.

Further EPS rises of 15% and 11% are forecast for this year and next, to which Tuesday’s interim results lent support. Though revenue grew by a fairly modest 7.5% (1.6% at constant exchange rates), adjusted pre-tax profit rose 33.1% with adjusted EPS up 29.7%.

Net debt is down from £16.1m to £3.2m, even after the £7.6m acquisition of Markel Industries.

The manufacturer of adhesive-based products for the Healthcare and Industrial markets saw both divisions doing well, with strongly increasing margins — up from 1.9% to 16.1% in the healthcare sector, with industrial margins up from 2.2% to 11.5%.

Why I’d sell

Impressive, so why would I sell? As I previously said in June, I think the shares are too expensive now, on a forward P/E of 27. I reckon I’m seeing the start of that phase which hits every classic growth share sooner or later, when early EPS rises start to slow down a bit and investors start taking profits.

In fact, since a peak in early June, Scapa shares have lost 9%, and though that’s very short term, they did dip a lot lower in September — and we’re seeing those erratic ups and downs that often mean the surefire enthusiasm of early investors is wearing off and they’re starting to look for the next big thing.

Scapa is a tempting company, but I foresee better buying opportunities to come.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Today’s results give me confidence that this FTSE SmallCap firm, which has a market cap of £106m, is a growth stock I’d be happy to buy and hold until 2020 or beyond. And I feel the same about a £205m-cap stock from the same index, which I’ll come on to shortly.

Down to business

Carclo’s largest division, Technical Plastics (about 60% of group revenues), supplies fine-tolerance, injection-moulded plastic components, mainly for medical products. The division’s first-half operating profit fell 6%. Management said this was due to some key new programmes being delayed into the second half and some operational issues that have now been largely resolved.

The lower profit from Technical Plastics was offset by a 16% increase at its other principal division, LED Technologies. This business, which designs and supplies specialised injection-moulded lighting systems to the luxury and supercar industry, accounts for 35% of group revenue.

The company’s balance sheet remains reasonable after an anticipated rise in net debt to £29.6m from £26m. And there was an encouraging fall in the pension deficit from a previously elevated level.

Nice growth stock on cheap valuation

All three of Carclo’s divisions (the third is a small business in aerospace) are set to have a stronger second half. Forecast earnings per share (EPS) of 12.75p for the full-year to 31 March put the company on a price-to-earnings (P/E) ratio of 11.4. This falls to just 9.5 for fiscal 2019 on the back of a forecast EPS increase to 15.3p, as that substantial medium-term profit growth the company referred to kicks in.

The company has been investing in its manufacturing assets, increasing capacity and efficiency, which should contribute to top-line growth (higher volumes) and bottom-line growth (higher profit margins). Operating in attractive markets and well diversified geographically, with 70% of revenues coming from outside the UK, I see Carclo as a nice growth stock on a cheap valuation.

2020 vision

The other growth stock I’d be happy to buy and hold until 2020 or beyond is the UK’s largest structural steel business, Severfield (LSE: SFR). The company, whose current projects include the new stadium for Tottenham Hotspur FC, has a UK order book of £221m and also an Indian joint venture with an order book of £64m.

The group delivered profit before tax of £13.2m for its financial year ended 31 March 2016 and its target is to double this by 2020. I calculate this would see last year’s EPS of 5.53p rise to over 7p. At a current share price of 67p, the trailing P/E is 12.1. I think it’s eminently reasonable for the market to maintain that multiple, which would mean an average 9% annual rise in the shares through to 2020. On top of that, I’m expecting an average 4% annual dividend yield on cost for investors at today’s price, giving a very decent average 13% total return a year.

Finally, even a small beat on earnings and dividends and a modest re-rating of the shares could bump the return up into the mid-to-high teens. As such, this is another growth stock I’d be happy to buy today.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

£100m target

AIM-listed Idox (LSE: IDOX) has a market cap of £269m at a share price of 66.5p. This supplier of software solutions and services to the UK public sector (and also to the wider corporate sector) has recently completed an £18.5m acquisition that will significantly expand its presence in the health and social care market.

The company is targetting £100m revenue “in the short-to-medium term” and I believe it could hit this target in 12-18 months. Based on an improving pre-tax profit margin and standard tax rate, I think we could see earnings per share (EPS) approaching 5p — 20% ahead of 2016’s 4.11p — for which growth you’re currently paying a price-to-earnings (P/E) multiple of 13.5.

Idox’s strategy is to supplement organic growth with acquisitions and, while acquisitions are never without risk, such a strategy can provide lucrative returns for investors if pursued in a disciplined manner. I believe the potential growth here is appealing enough to rate the shares a ‘buy’.

Double benefit

Severfield (LSE: SFR) is a main market company — listed in the FTSE SmallCap index — and has a market cap of £241m at a share price of 81p. It’s the largest structural steel business in the UK, supplying office buildings (such as the Shard), stadia (such as Liverpool’s Anfield), tunnels, bridges and so on.

European firms have become less competitive in bidding for UK work, thanks to the slump in sterling, and Severfield is enjoying the double benefit of seeing “more opportunities” in Europe.

For its financial year ending 31 March, I’m expecting the company to post EPS of a little over 5p — 37% ahead of last year’s 3.67p — for which growth you’re currently paying a P/E multiple of 16. This is another stock that looks very buyable to me.

Packing a punch

Macfarlane (LSE: MACF) is a constituent of the FTSE Fledgling index (main market companies that are too small to be included in the FTSE All-Share). Its market cap is £85m at a share price of 62p.

The Glasgow-based firm is engaged in designing, manufacturing and distributing protective packaging materials in the UK, as well as adhesive and resealable labels for fast-moving-consumer-goods customers in the UK, Europe and the US.

Like Idox, Macfarlane is pursuing a strategy to supplement organic growth with acquisitions, further cementing its packaging materials UK distribution leadership in what is a highly fragmented market. I’m expecting EPS of 5.5p (26% ahead of the previous year’s 4.37p) when the company posts its 2016 results a week on Thursday. For this growth you’re currently paying a P/E multiple of just 11.3. As you might have guessed, I rate this stock a ‘buy’ too.

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G A Chester 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.

At today’s 82p share price, Severfield is up around 41% from the 58p or so the shares reached in late June. And at 257p, Wincanton sits around 49% higher than the 172p we saw the shares touch during early July.

These stocks are marching on, but why? Let’s dig a little deeper to see if they can make decent investments from here.

A dividend explosion

Severfield’s chief executive Ian Lawson was upbeat in the firm’s interim results report released in November. He said a strong performance continued after the company’s September half-year period with margins up and healthy cash-generation. He thinks profit growth for the full year will be ahead of previous expectations, and to underline the directors’ confidence, the interim dividend was pushed up an impressive 40%.

Severfield’s strategy targets an underlying doubling of profit before tax over the next four years and, judging by the interim report, it looks like the firm is on course to achieve that goal.

However, just four years ago its position didn’t seem as rosy. Profits had collapsed and the firm tapped the market with a Rights Issue to pay down debt and fix its balance sheet. There’s no doubt that the firm’s operations are highly cyclical, but there could be more to come during the current upturn in operations.

Indeed, City analysts following Severfield anticipate the firm’s earnings bounce-back to continue with earnings per share rising 14% during the year to march 2018 and by 12% to March 2019.

A return to dividends

Wincanton’s interims were out in November too. The firm’s chief executive, Adrian Colman, said that good trading during the first half of the year justified the reintroduction of a dividend payment at the end of the previous year and dividends would continue with an interim payment. 

Dividend payments were last on the scene as far back as 2011, and one glance at the share price chart tells the story of the firm’s volatile trading over recent years — operating profit declined into loss as recently as 2012. Yet City analysts see progress ahead, predicting 4% uplifts in earnings per share for the years to March 2018 and March 2019.

More to come?

Companies with recovering operations such as these can be attractive as investments, but if I held their shares I would remain vigilant for approaching weakness in trading down the road. 

Right now, you can pick up shares in Severfield for a forward price-to-earnings (P/E) ratio of just over 14 for the year to March 2018 and Wincanton’s on a forward P/E rating of around nine. Severfield’s forward dividend yield runs at 2.8% or so, and Wincanton’s around 3.8%.

The valuations remain undemanding and the shares are on the move, but I think it’s worth remembering these firms’ troubled recent histories. If you’re tempted to take the plunge, it might be a good idea to remain cautious while holding the shares.

The post Up over 40% in 6 months, these 2 stocks are marching on appeared first on The Motley Fool UK.

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• How are Diageo shares looking in April 2026?

Kevin Godbold 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.

Arrow Global announced in November that total revenues detonated 37% during January-September, to £164.4m. And market appetite for the firm continues to fizzle as it follows through on its aim of “becoming Europe’s leading purchaser and manager of debt” — just last month the business entered the Italian market with the acquisition of Zenith for an enterprise value of €17m.

Against this backcloth the City expects the debt collector to keep punching explosive earnings growth for the foreseeable future, and predicts a 31% advance in 2016 to be followed by a 28% rise in the current period.

Consequently Arrow Global deals on a P/E ratio of nine times for the current period, falling below the bargain-basement benchmark of 10 times. Furthermore, a sub-1 PEG readout of 0.3 underlines the company’s exceptional value credentials.

Constructing corking growth

I also believe a healthy US construction market should help deliver resplendent earnings expansion at Tyman (LSE: TYMN) long into the future.

The number crunchers certainly expect the bottom line to keep swelling in the medium term, and have forecast a 15% rise for 2017, following on from an anticipated 12% rise last year. This results in a P/E ratio of just 11.5 times for the current year, as well as a PEG readout of 0.8.

And there’s good cause for such optimism. Latest construction data from across the Pond showed project spending up 0.9% in November, to $1.18trn, the highest since April 2006. And the strong industry upswing is expected to persist through 2017 at least as the US economic revival continues.

But the US isn’t the only bright spot for door-and-window-parts-builder Tyman, the company noting in November that “encouraging growth has continued in European markets and volumes have held up in UK and Irish markets.”

Build a fortune

And I reckon Tyman’s construction counterpart Severfield (LSE: SFR) is on course to deliver solid earnings growth too.

Despite concerns over the impact of Brexit on the construction sector, Severfield continues to rack up new business at an impressive rate. Indeed, Severfield’s order book clocked in at six-year peaks as of November, at £315m, providing the firm with terrific earnings visibility.

And Severfield’s presence in India also provides plenty of revenue opportunities. The company’s JSW Severfield Structures joint venture secured £29m worth of contracts just last month to build a variety of commercial and industrial structures. And the amount of business is likely to keep rising as the Indian economy booms.

The City has pencilled-in a 35% earnings advance at Severfield for the year to March 2017, creating a very-appealing P/E ratio of 15 times. And an anticipated 16% bottom-line charge in fiscal 2018 drives the multiple to a much-improved 12.9 times.

Moreover, PEG numbers of 0.4 and 0.8 for 2017 and 2018 highlight its exceptional value relative to its likely growth trajectory.

The post Are these the best small-cap shares for growth investors? appeared first on The Motley Fool UK.

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• How are Diageo shares looking in April 2026?

Royston Wild 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.