Alumasc (LSE:ALU) is a UK-based supplier of sustainable building solutions aimed at preserving water, reducing energy, and utilising recyclable materials. It’s been awarded the London Stock Exchange’s Green Economy Mark for its contributions towards reducing waste and improving the environment.

Why should I care?

According to a recent report by the US auditing and advisory firm Deloitte, renewables are “set for a variable-speed takeoff as historic investment, competitiveness, and demand propel their development“.

The report goes on to detail how federal investment in clean energy has never been stronger. Nor has demand from public and private entities to accelerate decarbonisation efforts. In the UK, such initiatives are even more apparent. As a company that complements this industry, Alumasc is in good stead to reap the rewards of its growth.

It’s not going to be a smooth road, though. 

In many ways, the costs of renewable energy solutions still outweigh the benefits. Wind energy, for example, often costs more to implement and maintain than the value of the energy it produces. This has been a thorn in the side of the clean energy debate for years. And while Alumasc is not directly involved in renewable energy production, its success is tied to the perceived legitimacy of the wider industry.

Should the tide of favour turn away from sustainable energy solutions, demand for Alumasc’s products would likely dwindle. I think this is unlikely considering growing concerns regarding climate change but it’s still possible.

So is it a buy?

Alumasc is just one of many small business entities poised to benefit from the growing demand for a sustainable future. But it’s one that appears to have even greater growth potential than others I’ve evaluated.

The share price is up 94% in the past five years, despite suffering significant losses in 2022 as inflation dampened the economy. As such, the weakened price is estimated to be 34% undervalued using a discounted cash flow model. Strong earnings have also pushed the trailing price-to-earnings (P/E) ratio down to 8.3, almost half the industry average.

And the cherry on top? A 5.6% dividend yield that’s well-covered by earnings and supported by a decade of consistent payments. All things considered, I see a lot of good reasons why the shares still have more room to grow.

The bottom line

Investing in penny stocks is always a more risky prospect than large-cap established companies. In this instance, the cyclical nature of the construction industry combined with strong competition and commodity price fluctuations could threaten Alumasc’s profits.

So to stay ahead of the game, it has its work cut out for it. But if it pulls it off, it could be the next big name in sustainable solutions. If I were looking to add a penny stock to my portfolio today, this would be the one.

The post Is there still time to snap up this ex-penny stock in May? appeared first on The Motley Fool UK.

Three stocks that flagged up as potential additions to my portfolio are Paragon Banking Group (LSE: PAG), Smiths News (LSE: SNWS) and Alumasc Group (LSE: ALU).

These three options deserve a closer look, and here’s why!

Some background (and risks)

Paragon Banking Group is, unsurprisingly, a bank. In 2024, the economy might not grow very quickly, and interest rates could be high. This, combined with the ongoing high cost of living, will make things tough. It will be similar to 2023 in terms of uncertainty, but each year has its own difficulties. Financial companies will need to adjust to pressure from different factors.

Smiths News is a distributor of newspapers, magazines, books and consumables. Management has raised caution that revenues may fall 3-5% in the medium term. But the company’s large market share and history of cutting costs well make the revenue issue just a small one, in my opinion.

Alumasc Group is a UK-based supplier of building and engineering products. As well as grappling with ongoing inflation, the industry is facing increased volatility in material prices. I think this poses as the biggest threat to the industry in 2024.

The metrics

“The higher the dividend yield, the better.” Not so fast! Many beginner investors searching for passive income can fall into the trap of this thinking. A high dividend yield is nice, but there are other factors to consider.

Therefore, I use a few filters to find dividend shares that could be great contributors in the long term. The first of which is looking at the share-price increase over the last 12 months.

If a share price falls dramatically, the dividend yield will increase significantly. However, the increase is not due to strong underlying fundamentals. In fact, it’s likely the opposite: weak fundamentals. Therefore, I look to avoid artificially high yields.

From my three selected companies, the 12-month performance is:

Alumasc: +11.2%
Paragon Banking Group: +29.3%
Smiths News: +1.0%

The second filter is focused on the company’s three-year free cash flow. Free cash flow is a key metric that helps a business function day to day, and supports income payments to investors without hampering operations.

To meet my criteria, a company has to have this metric above 10%. The figures are as follows:

Alumasc: 13.4%
Paragon Banking Group: 32.0%
Smiths News: 32.7%

The final part of my criteria is the dividend history. I want to find companies that aren’t stalling in dividend payments, but rather are growing them over the past few years.

All three companies tick this box. Their dividends are in line with or higher than their five-year average.

I’ll also add a fourth metric to the mix, because you may be wondering about this one. I look for a trailing 12-month (TTM) dividend yield above 4.5%.

The TTM dividend for my basket of dividend stocks is 6.4%. Smiths News leads the way with 8.8%, Alumasc with 6.0% and Paragon with 4.5%.

The post £10,000 in savings? Here are 3 stocks I’d consider to earn passive income appeared first on The Motley Fool UK.

The company is Alumasc (LSE: ALU). It supplies a range of products relating to buildings, for water management, roofing and other fittings.

In October, it delivered a robust trading update. Volumes and margins had been “strong” and ahead of the equivalent period a year earlier. Transportation and material costs had been “stabilising”. But energy costs and currency exchange rates remained volatile. However, the directors expect the business to benefit from a “strong platform for long-term growth”.

Vulnerable to economic downturns

I’d categorise the business as being vulnerable to the effects of general economic downturns. But the directors seem confident Alumasc has strong brands and solid positions in each of its market niches. And they expect the business to fare well in the years ahead.

Meanwhile, City analysts predict earnings will likely increase by around 4% in the trading year to June 2024. And in the current economic environment, I see that small increase in earnings as positive. 

But the valuation looks stingy. With the share price near 155p, the forward-looking earnings multiple is near just six for the trading year to June 2024.

And one reason for the low rating could be because of the multi-year record of volatile earnings. Indeed, from one year to the next, earnings have been as likely to plunge as they have to soar higher. For example, they rose by a triple-digit percentage in the 2021/22 trading year because of a back-log of orders caused by the pandemic. And the share price shot higher by almost 300% after the Covid collapse of 2020.

Encouraging contract wins

But over the past year, the stock has declined by just over 30%. And there’s a lot of potential value on offer at the current valuation. Indeed, the firm’s history of big swings in earnings and the share price is part of the reason I see potential for the stock to double.

Right now, the valuation is low and trading is good. Yet I’m also encouraged by recent contract wins to supply Gatic access and drainage products “across a number of projects for airports and seaports in Hong Kong, India, the Philippines and Singapore”.

Chief executive Paul Hooper said these wins demonstrate the global reputation of the Gatic products. And they underline the “significant” ongoing opportunity to supply large international infrastructure projects.

If further wins drive up future earnings, it’s possible investors may bid up the valuation. And a reassessment by the market could work alongside growing earnings to double the share price from where it is now. After all, a re-rating to 12 times earnings would not seem excessive to me.

However, positive outcomes are not guaranteed. The business may yet run into further operational difficulties and it’s even possible for me to lose money on the shares.

Nevertheless, if I had spare cash to invest now, I’d dig deeper into this opportunity with a view to buying the stock to hold as operational progress unfolds in the months ahead.

The post 1 UK stock I’d buy now and aim to double my money appeared first on The Motley Fool UK.

Egypt is the continent’s third-biggest economy and is experiencing soaring demand for communications services. Telecom Egypt said last month that “the strong data momentum witnessed during the pandemic has persisted throughout 2021” and expects double-digit revenues growth in 2022. I was also impressed by forecasts that EBITDA margins are predicted to grow “in the mid to high thirties.”

Today, the Egyptian economy derives around a quarter of GDP from petroleum. Thus the steady transition from fossil fuels to greener sources could pose a significant indirect risk to Telecom Egypt. But I think progress elsewhere in the economy could offset this threat.

A top green penny stock

Supply chain issues are also causing huge problems in the construction industry. Costs are spiralling and developers are reappraising the economics of certain projects. Even if the will remains, huge raw material shortages are preventing building work from starting, or continuing in many cases.

In this environment, building products supplier Alumasc Group (LSE: ALU) faces a not-insignificant threat to profits in the short-to-medium term. However, I’m still considering adding this penny stock to my shares portfolio today.

Why? For one, through its Timloc brand it offers a broad range of construction products for the housebuilding sector. It’s therefore well-placed to exploit the housebuilding boom of the coming decade (the government aims to create 300,000 new homes a year by the mid-2020s).

Secondly, I like Alumasc’s focus on manufacturing sustainable building products, something that will stand it in good stead as governments and businesses aim to become greener. In the company’s words, most of its products “manage the scarce resources of water and energy in the built environment, and improve quality of life for the owner/occupier using recyclable materials.”

5.2% dividend yields!

XPS Pensions Group (LSE: XPS) is another cheap UK share on my radar today. This particular company is the largest pensions consultancy in the country. It therefore stands to make big profits as the local population rapidly ages (government statistics suggest one-in-seven people will be aged over 75 by 2040).

I also like XPS Pensions because it operates in a market which remains stable at all points of the economic cycle. This makes it a dependable bet for those seeking a steady flow of passive income. Incidentally, the yield here sits at an appetising 5.2% for this fiscal year.

I’d buy XPS Pensions despite the threats created by its acquisition-led growth strategy, which could lead to disappointing profits or unexpected costs on buying mis-steps. However, the business has had decent success on this front, although past performance is no reliable indicator of future performance.

The post 3 cheap UK shares under £3 to buy today appeared first on The Motley Fool UK.

Asset managers like Scottish Mortgage Investment Trust, with enough cash and clout to get in early, have made a fortune. Their method? Buy Wise and flip the shares to the likes of small private investors like me.

CityWire tells how the tech fund doubled its money when Wise arrived on London’s stock market.

According to the FTSE 100 trust’s annual results to 31 March 2021, they made an absolutely killing. Wise made up 1% its £9.2bn NAV. Since then it has doubled to £18.1bn.

Best shares to buy now

An old boss of mine — now the CEO of an AIM-listed company — gave me some great advice back in the day. “If everyone else is in the trade,” he mused, “what new information do I have that is going to make me money? What edge do I have?” Can I snap up the best shares to buy now at a much lower price than everyone else? If the answer is no? Don’t invest.

I couldn’t buy Wise shares a year ago when Scottish Mortgage did. At the time, Bailie Gifford’s flagship fund managed to buy Wise when it sold $319m of shares. Again — these were only available privately, to the rich and powerful. 

Instead of focusing on the shares that everyone else is excited about, I buy mine at a discount. Then I simply wait for the rest of the market to realise they missed a bargain. 

Building back better

UK building companies are about to have a stellar year. That’s just one of the reasons why shares in Alumasc (LSE:ALU) are at the top of my list of best shares to buy now. I’ve covered Alumasc once before, in March 2021. I said this £100m micro-cap stock was a great buy for value and growth. In the months since, the building products supplier has grown from 170p to 275p, a tidy 61% profit.

But there’s more to come, I think. A May trading update pointed out: “Following a record first half year performance that saw double digit revenue growth and also a double digit return on sales, it is pleasing to report that this momentum has continued into Alumasc’s last four months.”

Upside/downside

All of Alumasc’s divisions are reporting strong performance. That increased market share, along with “encouraging” export sales to grow overseas business makes the shares a compelling buy for me.

Market conditions could fall off with the end of the stamp duty holiday. And cutting costs by £2.4m has improved margins, but these could fall if increased raw material and shipping costs become the norm. But anyone who has tried to get a builder to do any work will know that supplies are in massive demand. 

If Scottish Mortgage had £1,800 to invest, rather than £18bn, I believe this is what they might do too. The less money we have as investors, the smarter we have to be. Because we have to beat the giants at their own stock-picking game.

The post My best shares to buy now! Don’t be unwise! appeared first on The Motley Fool UK.

Why I think Alumasc is a share to buy now

At the beginning of February, building products supplier Alumasc (LSE: ALU) delivered a strong set of half-year results. Revenues and earnings were higher than last year. Net debt and the pension deficit were lower. And the directors declared an interim dividend underlining their confidence in the outlook for trading.

City analysts expect a triple-digit percentage bounce-back in earnings for the full trading year to June 2021, and high single-digit progress the following year. Meanwhile, the forward-looking valuation looks modest. And with the share price near 174p, the dividend yield looks set to be around 5.5%.

However, Alumasc’s fortunes are tied to the building and construction industry. And there’s a lot of cyclicality in the firm’s operations. The share price has already risen a lot since the Covid-crash last year. And the shares now change hands near the top of a price range established for around 20 years. Nevertheless, I’m tempted to put some of the shares in my ISA and hold them for the long term.

A steady business

NWF (LSE: NWF) operates as a specialist distributor of fuel, food, and animal feeds. I’ve admired the business for some time because of its steady nature and consistent financial and trading record. Revenue, earnings, and shareholder dividends have been on a gradual climb upwards for years.

In February, the company released its half-year results report covering the period to 30 November 2020. And the figures show a bit of a dent in revenues and earnings because of the pandemic. However, the directors didn’t miss the interim dividend but held it flat compared to the previous year.

The outlook remains positive. And the directors expect the business to be resilient through whatever other challenges the pandemic may yet throw at it. The company expects to resume its growth strategy based on organic and acquisitive progress.

The valuation looks full

However, there’s no coronavirus bargain for me to pick up here. With the share price near 221p, the stock has already exceeded its pre-Covid level. In fact, the share recovered fast and was already at its pre-crash level by 1 May. I reckon the market was quick to recognise the strengths of the business.

Looking ahead, City analysts expect the full year to May 2021 to deliver a single-digit percentage dip in earnings followed by a single-digit recovery the following year. And against those forward predictions, the earnings multiple is just above 12. The anticipated dividend yield is around 3.3%. Of course, forecasts can change.

Given the slow rate of growth on offer, we could argue that the valuation looks full. And another risk is that the stock is almost at its previous high just before it crashed during the financial crisis. That big down-move started in late 2007.

Nevertheless, I’m focused on the underlying business and its fundamentals. And I’d like to get the shares in my ISA to hold for the long term.

The post 2 shares to buy as the new ISA allowance comes in on 6 April appeared first on The Motley Fool UK.

On the way to building an $84.6bn fortune, Warren Buffett famously said that “risk comes from not knowing what you’re doing”. I don’t know anything about graphene or fashion, for example. So I don’t invest in companies in those businesses.

But I do understand these sectors.

Micro-cap stocks to buy

My first micro-cap stock to buy is Alumasc (LSE:ALU), an AIM-listed sustainable building products supplier. It’s a specialist in roofing, screening, and plastic-injection moulded products, which sounds incredibly boring. But these are the kinds of businesses that can make a lot of money for their shareholders.

It has a some debt on its balance sheet, so there is some risk there, but it does have nearly £20m in cash, which means it can take advantage of upcoming opportunities. With a forward P/E ratio of 7.8 and a PEG ratio of 0.4, my value investing Spidey senses are tingling! And dividends are returning in force after bosses sensibly cut them to save cash last year.

In half-year results to 31 December 2020, revenue climbed 11% to £45.6m, pretax profits doubled to £5.5m from £2.1m, and earnings per share jumped more than 100% from 5p to 12.2p. That shows me there is growing demand for Alumasc’s low-carbon building products. In the last 12 months Alumasc has brought in £80.4m in revenue. That’s 30% higher than its total market cap. Talk about an undervalued micro-cap stock to buy. 

Alumasc does have a number of rivals like Polypipe Group (LSE: PLP) or the much larger FTSE 250 firm Ibstock (LSE:IBST) and competition is fierce at this end of the market. The overall risk here is that Alumasc can’t differentiate itself over time and fails to win new contracts.

Cleaning up

The next stock to buy on my micro-cap wish list is McBride (LSE:MCB). This is Europe’s largest maker of own brand household goods. But at a market cap of just under £150m it’s not particularly well known to investors. Again, like Alumasc, it’s the profitability, stonking value, and growth that’s got me excited here.

There has been “strong profit performance driven by increased demand for cleaning, dishwash and aerosol products,” McBride said in its 2021 half-year report. Pre-tax profits rose 74% to £16.9m. In a post-Covid-19 world I see increased demand for these products in future, too.

There will also be a new policy of annual dividends, McBride boss Chris Smith announced in February 2021. These shareholder payouts should be easily affordable, with McBride’s dividend cover of 5.3. Dividend cover of less than 1 means a business is paying out more in dividends than it makes in profits.

McBride’s net debt of £117.6m is an issue, however. I usually buy business that are debt-free. Smith has set strict debt limits for his team to follow, but if these fail there could be a long-term hit to profits. 

The UK’s economic fortunes could rebound faster than predicted, the Bank of England said this week. So the micro-cap stocks to buy, for me, will be the ones able to cash in on soaring household and business spending. 

The post 2 micro-cap stocks to buy for value and growth appeared first on The Motley Fool UK.

Edward Sheldon: Calnex Solutions

My top micro-cap stock is Calnex Solutions (LSE: CLX). It’s an under-the-radar technology company that specialises in testing and measurement services for telecommunication networks.

Calnex is benefitting from the rollout of 5G networks and the widespread adoption of cloud computing. The company’s H1 results for the six months to 30 September 2020, for example, showed revenue growth of 37%. Meanwhile, the company recently advised that its revenue for FY2021 would be ahead of market expectations. It also said that it is well positioned to deliver its historical growth rates over the long term.

Like any micro-cap, this stock could be volatile. However, overall, the investment case looks attractive, in my view.

Edward Sheldon owns shares in Calnex Solutions.

Christopher Ruane: Foxtons

Estate agent Foxtons (LSE: FOXT) offers exposure to any rebound in the London property market.

The pandemic had an impact and revenue fell 12% last year. However, the pre-tax loss was sharply reduced from the prior year despite the difficult market. The company moved back into profitability in the second half of last year and says financial performance has continued to improve. Revenue in January and February was well ahead of the prior two years.

Its well-known brand is an asset in the crowded London market. I would consider buying Foxtons at its current price.

Christopher Ruane does not own shares in Foxtons.

Jonathan Smith: McBride 

McBride (LSE: MCB) is a UK-based manufacturing firm that offers private label services as well as producing some own-label products. This is mostly in the household cleaning area. 

The share price is up over 40% over the past year, thanks to increased demand from lockdown for many lines. Fiscal half-year operating profit (H2 of 2020) was up 83.6%, which impressed me.

Going forward, I think the business is well diversified with operations in 12 countries. It also appeals to ESG investors, given that 99% of packaging produced is recyclable.

Jonathan Smith has no position in McBride.

Royston Wild: Michelmersh Brick Holdings 

Continued strength in the UK housebuilding industry leads me to believe that Michelmersh Brick Holdings (LSE: MBH) will release encouraging trading news later this month. The AIM-quoted company is due to unveil full year results on Tuesday, March 30. 

Michelmersh certainly impressed when it last updated the market in November. Then it said that production capacity had returned to pre-coronavirus levels and that trading had remained “resilient” since June. Consequently it said that underlying revenue and profit would beat market estimates for 2020.

Today Michelmersh trades on a price-to-earnings growth (PEG) ratio of just 0.9 for 2021. This suggests that the company is being undervalued by market makers. And it’s a reading so low that I think another positive update in the coming days could prompt a sharp re-rating of the brickmaker’s shares.

Royston Wild does not own shares in Michelmersh Brick Holdings.

Conor Coyle: MacFarlane Group 

MacFarlane Group (LSE:MACF) is a micro-cap stock I think could be set for significant long-term growth. The company designs, manufactures and delivers packaging to businesses throughout the UK. Demand for packaging products has shot up as the number of online deliveries has increased due to the pandemic.

The Glasgow-based company is a well-established business and has continued to post strong profits despite economic uncertainty in the last year. I think its online retail profits will continue to grow, and with key customers in the aerospace industry bouncing back this year I see further growth ahead.

Conor Coyle does not own shares in MacFarlane Group.

Roland Head: UP Global Sourcing

One small-cap stock whose prospects excite me is UP Global Sourcing (LSE: UPGS).

This firm owns and licences a range of consumer goods brands, such as Russell Hobbs, Salter, Beldray and Constellation. Demand for kitchen, laundry and cleaning products has been strong during lockdown, with sales up 11% during the six months to 31 January.

There’s obviously a risk that demand could slow as the UK exits lockdown. But the firm recently upgraded its sales guidance for the year ahead, reporting “strong momentum” in new orders.

UPGS shares are up by 50% from their pre-pandemic levels. I believe they have further to go.

Roland Head owns shares of UP Global Sourcing.

Tom Rodgers: Alumasc

Sustainable building materials producer Alumasc (LSE:ALU) is one of my favourite kinds of stocks. The kind that no-one’s heard of until suddenly everyone’s heard of it.

Established in 1945, the AIM-listed firm’s shares are trading at a three-year high, and it will pay a hefty 5.4% dividend yield next year. It boasts a forward P/E ratio of just 7.8 and a forward PEG of 0.4, making it seriously undervalued in my book. The fact that the company’s £61.7m market cap is well below its annual £80.4m revenue does it no harm at all, either.

Tom Rodgers has no position in Alumasc.

Jabran Khan: Yourgene Health

Yourgene Health (LSE:YGEN) is a genetic testing firm that produces non-invasive products for male fertility and prenatal screening for cystic fibrosis and more. Yourgene joined the Covid-19 products market with a testing solution.

It has established a presence in the UK, Europe, the Middle East, Africa and Asia. YourGene relies on commercial partnerships with larger firms, which I see as a positive.

Trading in the past year has shown progression for the £117m market-cap business. FY results are due soon and are expected to be positive. At just 16p per share, Yourgene could be a micro-cap gem for the long term in my portfolio. 

Jabran Khan has no position in any of the shares mentioned.

Rupert Hargreaves: Belvoir Group

Property franchise group Belvoir (LSE: BLV) offers a range of services from lettings to sales and financial services.

Growth since 2014 has been outstanding. Net income has grown at a compound annual rate of 28%. And Belvoir is expecting to report revenue growth of 12% for 2020.

Despite its historical growth, Belvoir has its risks. If the UK property market should start to struggle, the firm’s income may begin to shrink. Still, I would buy this micro-cap stock considering its potential to grab market share over the next few years.

Rupert Hargreaves does not own shares in Belvoir.

G A Chester: Trans-Siberian Gold 

Trans-Siberian Gold (LSE: TSG) is a low-cost, high-grade producer from its Asacha mine in Far East Russia. It also has exploration and development assets in the region. 

Its strong balance sheet and cash generation enable it to invest for growth, and reward shareholders with dividends and share buybacks. It aims to pay a sustainable base dividend through the commodities cycle, and – as currently – higher payouts when cash flows permit. The running yield is near 8% right now. 

Operational risk is currently concentrated due to TSG’s single producing mine, but it does have ambitions to become a mid-tier, multi-asset gold producer. 

G A Chester has no position in Trans-Siberian Gold.

Andy Ross: Totally 

Shares in healthcare services provider Totally (LSE: TLY) have more or less trebled over the last 12 months. In my opinion, it’s a strong micro-cap business with long-term potential and room for more share price growth.  

I believe that the shares should continue to do well because the group has launched an insourcing business, has a strong relationship with the NHS and has made selective acquisitions that will boost earnings growth. It’s addressing a huge potential market across the UK & Ireland, and in time potentially further afield.  

The group is likely to become profitable shortly, has been growing revenues rapidly year-on-year and already pays a dividend, which is a bonus.  

Andy Ross does not own shares in Totally.

Nadia Yaqub: Scancell

I reckon things look promising for Scancell (LSE: SCLP). It’s an immuno-oncology company. That’s a fancy way of saying it develops treatments that stimulate the body’s own immune system to treat or prevent cancer. Some of Scancell’s products are being tested in clinical trials.

But I reckon the real gem is its second generation Covid-19 vaccine. According to Scancell, its version of the jab could develop long-term immunity to the virus and offer better protection against the variants. It’s still early days, but I think Scancell has bags of potential.

Nadia Yaqub does not own shares in Scancell.

Kevin Godbold: Ramsdens Holdings

Ramsdens Holdings (LSE: RFX) operates from around 157 stores in the UK, offering pawnbroking, financial, retail and foreign currency exchange services. It’s a decent business and the firm sports some impressive quality indicators. City analysts expect earnings to bounce-back by almost 60% in the trading year to September 2022.

With the share price near 172p, the forward-looking earnings multiple is just above 11. And the anticipated dividend yield is around 3.5%. I like the net cash position on the balance sheets and the positive outlook for growth in earnings. That’s why I’d buy this micro-cap stock to hold for March and beyond.

Kevin Godbold does not own shares in Ramsdens Holdings.

Kirsteen Mackay: Trans-Siberian Gold

My top micro-cap stock for March is Trans-Siberian Gold (LSE:TSG). I think gold stocks can help achieve a diversified portfolio. With low interest rates likely to stay low for some time, this provides a favourable environment for gold. And hints of inflation on the rise make me think gold remains a good hedge.

Trans-Siberian Gold operates in Russia and recently reported a significant upgrade to the resources at its flagship gold mine following a successful drilling campaign. Its market cap is £81m and it has a price-to-earnings ratio of 14. The company pays a 7% dividend yield. 

Kirsteen Mackay does not own shares in Trans-Siberian Gold.

Zaven Boyrazian: Tracsis

The UK government recently unveiled its roadmap to ease lockdown restrictions within the UK. As more people head back to the office or go on a long-overdue holiday, the demand for Tracsis’ (LSE:TRCS) services is rising.

Tracsis engages in traffic data analysis, along with railway fault detection systems. Using its software solutions, optimised routes for vehicles can be plotted within pedestrian-rich areas.

The business is far from risk-free. Covid-19 led to a significant rise in operational expenses, and there are numerous competitors to outperform.

But despite these threats, I think the stock is on track to continue delivering long-term growth for my portfolio.

Zaven Boyrazian does not own shares in Tracsis.

Manika Premsingh: McBride

The private label household and personal-care goods’ manufacturer McBride (LSE: MCB) has made share price gains since late 2020. However, its price is still way below its pre-pandemic levels.

I could see it staying there if McBride was Covid-19 hit. But the opposite is the case here.

It has actually seen a rise in revenues for the six months ending December 31, 2020 as the pandemic drove up cleaning products’ demand. It is also profitable and expected its full-year pre-tax profits to be 10% ahead of the consensus estimate at the time it made the statement.

McBride’s profits have fluctuated in past years and its debt is growing. But on balance, I am optimistic about its prospects, making it my top micro-cap stock for the near term.

Manika Premsingh has no position in McBride.

Paul Summers: Ramsdens Holdings

My top micro-cap pick for March is Ramsdens Holdings (LSE: RFX).

Investing in a pawnbroker may not be everyone’s cup of tea but Ramsdens is also a jewellery retailer, precious metals buyer/seller and foreign currency specialist. Although there can be no guarantees, the last of these might recover strongly once UK holidaymakers are allowed to travel again. In addition to this earnings diversity, the company’s finances look strong and it makes great returns on invested capital. 

Shares remain far below the highs hit in early 2020. With lockdown restrictions set to end, I think we might see this gap close over the rest of the year. 

Paul Summers owns shares in Ramsdens Holdings.

The post Top micro-cap stocks for March 2021 appeared first on The Motley Fool UK.

Market-beating growth champion

DS Smith (LSE: SMDS) is one of the London market’s best-performing stocks. The last time I covered the company, at the end of June, I calculated that the stock had produced a total return for investors of 28.5% per annum over the past five years. Since then the stock has gone on to add another 10% excluding dividends. 

A trading update issued by the company today accounts for some of these gains. 

Trading for the first half has been in line with expectations with “very strong” volume growth. Meanwhile, the group’s  return on capital employed is in the upper end of the target range. 

Group Chief Executive Miles Roberts said: “We are pleased with the consistently strong organic progress of the business. Customers continue to demand high-quality, innovative packaging on a multi-national basis and we have the scale and expertise to serve them.”

The company also said that the integration of US East Coast-based Interstate Resources Inc, which was acquired mid-year, is apparently going to plan and to help boost growth further, in mid-October DS announced the acquisition of EcoPack and EcoPaper in Romania. 

Investor returns are key  

As well as serving customers, DS is also serving its investors well. Gains of 25%+ per annum are some of the best around and even after this performance, the shares are not particularly expensive. 

Shares in DS currently trade at a forward P/E of 15.1, falling to 13.7 for the fiscal year ending 30 April based on current City forecasts. This valuation does not look particularly demanding to me, especially as the company continues to invest in growth. I believe the company can continue to achieve double-digit annual returns for investors for the next decade as growth continues. 

Explosive growth 

DS isn’t the only company that’s managed to achieve double-digit returns for investors over the past five years. Manufacturer of external building parts Alumasc (LSE: ALU) has seen its shares return 19.4% per annum for the past five years as earnings per share have nearly doubled. 

Alumasc’s returns have come from a combination of both growth and dividends. As earnings per share have grown steadily, management has distributed a large portion of income to investors. The result is that its owners have received a double-digit annual return. 

It looks as if this is set to continue. Right now the shares support a dividend yield of 4.6% and City analysts are projecting earnings per share growth of 7% for the year ending 30 June 2018. Assuming the company’s valuation does not increase, according to my figures, the combination of growth and income will produce a return of 11.6% for investors. 

However, it’s also possible the shares could re-rate to a high valuation. At present, shares in Alumasc are trading at a forward P/E of 7.7 compared to the sector average of 9.3. 

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Furthermore, a forecast dividend of 7.65p (covered a robust 2.8 times by forecast EPS) gives a juicy prospective yield of 4.6%. And, just for good measure, this £59m cap company has a strong balance sheet, having reported a net cash position of £6.1m at its last financial year-end of 30 June.

Dependent on H2 to meet expectations

Alumasc provides premium products and systems in high-growth niches in its principal market of UK construction. It’s also building export sales. These jumped to 17% of last year’s group revenue of £105m from 9% of £92m the year before.

The company today advised that against a background of relatively flat demand in the UK construction market, its like-for-like domestic revenues increased by 4% year to date. However, it also said that export sales “are lower than the prior year.“ It didn’t put a number on the decrease but said it reflected, “the later phasing of larger projects.”

Indeed, this was a theme in a number of areas of business across the group and we were told “financial performance is expected to have a greater weighting towards the second half than was the case last year.” The H1/H2 profit weighting was 45%/55% last year, so the current-year outturn is going to be very dependent indeed on a strong second half. In such situations, the risk of a profit warning is heightened.

Alumasc appears to be well managed and I like its focus on specialist segments and its international ambitions. Nevertheless, there’s no getting away from its exposure to the cyclical construction market and there are recent signs this is weakening in the UK. I will await the company’s second-half performance with interest, but I’m minded to avoid it right now.

Confident outlook

I’m rather more confident on the outlook for specialist staffing group Empresaria (LSE: EMR). Its shares are trading at 127p, as I’m writing, valuing it at £62m. A current-year EPS forecast of 13.9p puts the company on a P/E of 9.1 and this falls to 8.5 for 2018 on expectations of a rise in EPS to 15p. Dividend forecasts of 1.3p and 1.45p give yields of not much more than 1%, but with these payouts covered more than 10 times by forecast EPS, there is plenty of scope for substantial increases in coming years.

Of course, like the construction market, recruitment is also cyclical. However, Empresaria is nicely diversified by both sector and geography. Seven key sectors range from aviation services to healthcare, while the group operates in 20 countries around the world. The breakdown of last year’s £270m revenue was Continental Europe 34%, Asia Pacific 29%, UK 26% and Americas 11%.

The company is seeing good growth opportunities within its existing businesses and from potential complementary acquisitions. It said in its half-year results to 30 June that it’s “confident” of meeting full-year market expectations. As such, I rate the shares a ‘buy’.

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