In a number of cases, the companies are just too small for big institutional investors. But that’s not a problem for me and I’ve been looking for opportunities that might be going unnoticed.

Judges Scientific

Judges Scientific (LSE:JDG) is a collection of scientific equipment companies. It operates a strategy of buying smaller businesses and helping them grow via its existing network. 

Being small is an advantage for this type of business. It means there’s less competition from private equity and bigger firms for acquisitions, which helps reduce the risk of overpaying.

The longer this stays the case, the more scope for growth the company has. And with a market value of £380m, I think there’s a long way to go before size starts to become an issue. 

One thing that can be an issue, though, is uneven demand. Judges Scientific’s subsidiaries depend on funding for scientific research and this has been weak in the US recently. 

To some extent, this has been offset by revenue from a coring expedition in the first half of the year. This income, though, is infrequent and won’t be repeated in H2.

While the near future might be bumpy, I think the long-term outlook is very positive. It has an impressive record of buying companies at low multiples and I expect this to continue.

Celebrus Technologies

In general, I think software companies have a big problem with artificial intelligence (AI) disruption. But Celebrus Technologies (LSE:CLBS) is a rare exception to that rule.

The firm’s main product lets organisations track customer activity on their apps and websites. Importantly, it does this without using cookies (which can be disabled by users).

Even more importantly, the company’s core technology is protected by patents. Unlike some other software firms, that gives it a barrier to entry that code-writing AI can’t easily get across.

In short, I think Celebrus has a quality product. But it still has to convince customers to pay for it and that won’t be entirely straightforward in a market with larger competitors.

Celebrus is currently shifting away from reselling third-party products to focusing on its own software. And that has meant complicated changes in the way it recognises its revenues. 

Based on the new model, though, the stock is trading at a price-to-sales (P/S) ratio of below three. And that’s the kind of value I don’t think investors can find elsewhere.

Volatility

One of the things investors have to get used to with small-cap stocks is volatility. There’s less money focusing on these opportunities and that can make prices jump around. 

With both Judges Scientific and Celebrus Technologies, this is exaggerated by uneven earnings patterns. But both of these features can create buying opportunities. 

I’m not looking to focus my entire portfolio on these kinds of stocks. But they’re an important part of my plan to aim for long-term outperformance.

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Celebrus Technologies (LSE:CLBS) is a name I own in my portfolio. I’m impressed with the way the business has been performing and the outlook looks positive from here. 

Revenue growth… sort of

Earlier this week, Celebrus released its trading update for the six months leading up to the end of September. A 40% revenue decline looks alarming, but it’s not quite what it seems.

Those results are distorted by a change in the firm’s accounting practices. Instead of booking revenues in full when it makes a sale, it spreads them over the life of the contract. This change is the result of Celebrus shifting from reselling third-party products to focusing on its own software.

So a better number to focus on is annual recurring revenues (ARR). This was 20% higher than a year ago, which is a very positive result. And it’s why the stock climbed 7% when trading opened on Tuesday (21 October) as the report was released.

Valuation 

UK stocks often trade at a discount to their US counterparts. And while Celebrus doesn’t have an obvious analogue across the Atlantic, it does look like unusually good value.

The firm has a market value of just under £59m. But it has £20m in excess cash on its balance sheet, which brings its enterprise value to £39m. 

With ARR reaching £11.5m during the first half of the year, the stock’s currently trading at just over three times sales. For a software company, that’s very low. 

Pre-tax profits were negative during the first half of the year. But with the firm expected to generate £3.3m in free cash flows, an enterprise value of £39m doesn’t look demanding.

Artificial intelligence

Celebrus provides software that allows businesses to see what visitors to their websites or users of their apps are doing in real time. Importantly, it does this without using cookies.

That sets it apart from competitors offering similar products. But it’s important to note that the company gives away a lot in terms of scale against the likes of Adobe and Salesforce.

Artificial intelligence (AI) has cut into their competitive positions of both businesses recently, so this can’t be ruled out with Celebrus. But I see AI as a good thing for the UK firm. Unlike Adobe and Salesforce, Celebrus has an AI-native product. And this has increased the value of quality data, which is exactly what its platform provides.

Investment thesis

I think the stock market’s overlooking Celebrus shares at the moment and I don’t have any idea when that might change. So investors need to focus on the underlying business.

The stock isn’t one to buy with a view to trying to sell it over the next couple of years. It might well still be going under the radar of the majority of investors. 

If the business keeps growing though, I expect to do very well with my investment. And I think investors looking for AI opportunities should consider adding it to their portfolios.

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That might seem like a strange decision, but I think it makes a lot of sense from a long-term perspective. And there are a couple of UK names I currently hold that are also at the top of my buy list for when I next have cash.

Dividends

The two stocks in question are Celebrus (LSE:CLBS) and Judges Scientific (LSE:JDG). At the moment, neither is in a position to match the returns of a 7% dividend.

It’s worth noting though, that unlike a lot of dividend shares, both companies retain significant amounts of the cash they generate and invest it for growth. And this is worth factoring in. 

On a forward basis, Celebrus is expected to generate around 5.7% of its market value in free cash and Judges Scientific is set to bring in a 3.6% return. This makes the gap significantly closer.

I don’t think either stock is a good choice for investors who are looking for big cash returns in the near future. But from a long-term perspective, they look much more attractive.

Celebrus

Celebrus is a rare example of a genuine UK tech stock. It’s a software business with a product that allows companies to monitor customer activity on their apps and websites.

The firm’s core product is protected by strong intellectual property. But it operates in an industry where there are much bigger competitors – and this is the major risk.

Its free cash outflow in 2025 is the result of a one-off change in working capital as the business transitions to a recurring revenue model. So I don’t expect this to be repeated in the future.

Analysts are expecting free cash flows to reach 8% of the firm’s current market value by 2028. And if the growth continues, I think Celebrus shares could be a terrific long-term investment.

Judges Scientific

Judges Scientific is a decentralised collection of companies focused on scientific instruments. And a key part of the firm’s growth strategy involves adding more businesses to its network.

There’s always a risk of overpaying for an acquisition and a decentralised approach emphasises this. It means earning a return on investment by integrating businesses to cut costs is harder.

But the company has a lot of advantages on its side. In terms of acquisitions, its size means it typically finds opportunities that are too small to interest larger private equity firms.

That means competition is limited, which is helpful when it comes to negotiating deals. And I think this means Judges Scientific has a chance to keep growing for a very long time to come.

Long-term investing

Neither Celebrus nor Judges Scientific looks attractive based on last year’s earnings and free cash flows. But I expect both to grow their earnings and free cash flows strongly for a long time.

It takes a lot to make me turn away from a 7% dividend yield from a resilient-looking business. Over the long term, however, I think I’m likely to get better returns from companies that can grow.

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That’s certainly been the case with Celebrus Technologies (LSE:CLBS) earlier this year, falling by over 20% in a single day following disappointing results. And until recently, the stock was down almost 50% since the start of the year.

The shares have since recovered, undoing some of this downward trajectory. But with Celebrus still trading firmly below its average earnings multiple, could investors be looking at a rare opportunity to snap up one of Britain’s few technology enterprises at a discount? Let’s take a closer look.

What’s going on with Celebrus?

As a quick crash course, Celebrus offers a unique real-time analytics platform that allows businesses to monitor how customers interact with their websites and apps. However, the key difference here is that Celebrus doesn’t rely on cookies, making it far more reliable than traditional analytic solutions and harder for web-goers to opt out.

The share price crash in April came as a result of a profit warning that full-year revenues were likely to be behind expectations. Geopolitical uncertainty, particularly within the trade landscape, resulted in delays and slower decision-making from businesses. And subsequently, Celebrus’ customers became more cautious in their spending.

This risk-averse behaviour resulted in extended sales cycles, hence why management revised down its full-year revenue guidance. Obviously, that’s frustrating. But at the end of the day, these delays aren’t a result of poor or faulty technology, but rather short-term economic headwinds. And this became perfectly evident in its subsequent results earlier this month, which sent the share price flying back up again.

Beating expectations

Despite a seemingly weak start to 2025, Celebrus’s full fiscal year results (ended in March) weren’t as dire as many had suspected. Annualised recurring revenue enjoyed a 13.9% boost, along with significant gross margin expansion, and a 28.6% surge in earnings per share.

Management also successfully secured two new major contracts, including a three-year deal with a European bank, and another three-year deal with a US fintech firm to optimise its trading platform. Combining all this with the launch of a new buyback scheme to repurchase 500,000 shares (valued at just shy of £1m), it isn’t surprising to see investor sentiment improve.

Yet even with this recent boost, the stock continues to trade at a discount. The business has proven to be far more resilient to the macroeconomic landscape than previously expected. But that could change in the future, if trade tensions continue to escalate.

At the same time, Celebrus has other weaknesses to consider. And perhaps the most significant is that its client list remains fairly concentrated, with revenue primarily driven by just a small collection of large contracts.

Nevertheless, given the long-term trends in analytics demand, this business seems to offer a unique solution that warrants closer investigation. At least, that’s what I think.

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The business is performing well, with strong growth across the board. Despite this, the stock is still down 40% since the start of the year, so should I keep buying?

Growth

Celebrus is a software firm with a product that allows businesses to track activity on their websites and apps in real time. Unlike competitors, it does this without relying on cookies.

Despite being a UK business, the company reports its revenues and profits in US dollars. And both sales and profits were up significantly from the previous year.

The key metric with this type of business is Annual Recurring Revenue (ARR), and this grew 13.9% to $18.8m. Earnings per share (EPS) increased by just over 36% to 18.24c.

Separately, the company announced two new contracts – one with a European bank and another with a US fintech firm. These are set to boost ARR by $1.1m in the first year and more in the future. 

Analysis

Earlier this year, Celebrus had offered cautious earnings guidance. Management cited the risk of an uncertain geopolitical environment causing businesses to be wary with their spending.

Given this, I think the latest results are very positive. And the company continues to demonstrate its broad appeal, with new customers including a global airline and a major fintech.

One thing I’m mindful of, however, is the fact the reporting period only finishes at the end of March – so before the recent tariff uncertainty. That’s an ongoing risk, especially at the moment.

Overall, I see the results as a resilient performance during what should have been an unusually challenging year. Given this, I think the current valuation still looks attractive. 

Valuation

At today’s exchange rates, the full-year results mean Celebrus shares are trading at an (adjusted) price-to-earnings (P/E) ratio of just under 13. That’s after the latest move in the share price.

That’s quite low compared to other tech stocks, but the company also has around a third of its market value in net cash on its balance sheet. Adjusting for this, the stock looks even cheaper.

I don’t think this accurately reflects the company’s growth prospects. Celebrus has orders in place that should boost ARR to almost $20m – a 10% increase on the most recent results. 

I’m expecting higher sales to lead to higher margins, which should result in faster growth in EPS. On this basis, a P/E ratio of less than 13 looks like a bargain to me. 

Buying?

I still think Celebrus has some impressive prospects and the current share price looks like a bargain to me. On that basis, it’s staying on my list of stocks to consider buying.

The share price moving higher means the stock now accounts for quite a bit of my portfolio. So only for reasons to do with diversification, I need to think carefully about what to do.

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Left behind in aerospace

The global aerospace sector has performed well in recent years. That’s largely because of a recovery in civil aviation following the pandemic as well as increased defence spending. Rolls-Royce shares are up 970% over five years, but Melrose Industries (LSE:MRO) is up just 98% over the five year period. While that might sound like a good return, five years ago was the middle of the pandemic and much of the growth came later in 2020.

Recent performance has been hampered by supply chain challenges in the broader industry. However, the forecast is starting to look rather positive. Melrose is targeting ambitious growth with management aiming to grow earnings by over 20% annually through 2029, with five-year goals including 43% revenue growth and a doubling of operating margins. 

And yet the market continues to value the company at 14.1 times forward earnings. This also suggests a price-to-earnings-to-growth (PEG) ratio around 0.7. That doesn’t seem fair considering the expected earnings growth, but also because the firm has such an impressive economic moat. Around 70% of sales are generated from sole source positions — in other words, there are no peers. Its technology also features in all of the world’s top aircraft engines.

Risks? There are always risks. Net debt’s larger than I’d like to see. Meanwhile, if supply chain challenges persist, Melrose may struggle to hit its 2029 targets. Despite this, I believe it’s well worth considering.

Underappreciated tech

Celebrus Technologies (LSE:CLBS) could be a hidden gem for investors. Despite recent revenue softness — largely due to macroeconomic and geopolitical uncertainty — the company’s earnings have proven resilient, underpinned by strong cost discipline and a shift towards higher-margin software.

Sadly, analysts’ forecasts have disappeared from the internet. They were probably getting old and there aren’t many analysts covering this small-cap tech stock. However, they had been pointing to 14p per share, indicating that the stock’s trading around 10 times forward earnings. That’s not bad considering 35% of the market-cap’s currently covered by net cash.

And it’s this fortress balance sheet that really interest me. It provides financial flexibility and a solid margin of safety. The company also offers a healthy 2.1% dividend yield, rare in the tech sector, and is making progress in building recurring revenues and defending its IP portfolio.

However, I’m sure another disappointing trading update wouldn’t be well received by the market. I typically find investors have little patience with small-cap stocks. It needs to start delivering.

Personally, I believe Celebrus is worth considering. There’s more risk here than I’m used to, given the lack of coverage. However, the cash position provides something of a buffer.

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However, they’re both constituents of the Alternative Investment Market (AIM) and I believe they’re both looking pretty cheap at the moment.

Celebrus is cash-rich

Celebrus appears to offer strong value at current levels. The forward price-to-earnings (P/E) ratio’s just 8.2 times, and the forward EV-to-EBITDA’s five times, both of which are attractive compared to typical software sector multiples. Notably, net cash represents about half of the company’s market capitalisation, providing a significant margin of safety and financial flexibility.

While the most recent results disappointed on revenue, earnings held up well, demonstrating operational resilience and cost control. This combination of low valuation multiples, a robust balance sheet, and earnings stability — even in the face of softer top-line growth —suggests the market may be undervaluing Celebrus’ long-term potential.

The company’s ability to generate solid EBITDA and maintain profitability, alongside a healthy dividend yield, currently at 2.1%, further supports the view that Celebrus is good value for investors seeking both growth and downside protection.

Risks? Well, the company’s pointed to increasing uncertainty in geopolitics as a reason for slowing sales. This trend will need to reverse in order to regain investor confidence.

More cash at Yü Group

Yü Group potentially has an even more compelling valuation. The forward P/E ratios for 2025 and 2026 are 7.39 times and 6.96 times respectively. That’s well below sector averages.

Dividend per share is forecast to rise from 71.3p in 2024 to 83.6p in 2025, 89.4p in 2026, and 94p in 2027, with yields climbing from 3.3% to 5.1% during the period. This demonstrates a clear commitment to shareholder returns.

Crucially, Yü Group’s net cash position’s exceptional. Net cash is expected to reach £116.5m in 2025, £141.9m in 2026, and £165.3m in 2027. With a market-cap of £261m, it’s worth recognising quite how large these figures are. It also provides some protection against any depreciation.

While the company’s valuation has grown rapidly, the forward EV-to-EBITDA multiple falls from 4.7 times in 2024 to just 3.3 times in 2025 and 2.7 times in 2026, reflecting both earnings growth and the rising cash pile.

Of course, there are risks. This includes the company’s exposure to energy price volatility. While the company employs hedging and derivative instruments to manage this risk, adverse movements or ineffective hedging could impact profitability.

However, strong free cash flow yields and a proven growth trajectory, Yü Group stands out as a high-quality, cash-rich growth stock. It also appears to be trading at a discount to its fundamentals.

Personally, I think both are worthy of consideration. Celebrus is now part of my portfolio. I may look to add Yü Group as well.

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Valuation: a deep discount to peers

Celebrus currently trades at an enterprise value-to-EBITDA (EV-to-EBITDA) ratio of just over five times. This is a fraction of the broader sector average, which hovers around 14 times. And this is why I think it’s one of the cheapest stocks I’ve seen. The combination of low price-to-earnings (8.6) and cash — as we discover later — makes it very attractive.

For context, companies in the cybersecurity space also typically trade much higher, with CrowdStrike and Snowflake both with EV-to-EBITDA ratios around or above 100.

Why’s it so cheap? Part of the answer lies in recent trading updates. Celebrus warned that FY25 revenues are expected to dip to $38.6m from $40.9m in FY24, citing delays in customer decision-making amid global uncertainty. 

Yet, despite this revenue softness, adjusted pre-tax profits are set to rise thanks to higher-margin software sales and tight cost controls. This suggests the company is actively improving its earnings quality, not just chasing top-line growth.

One upside to the forecast — if correct — is that delayed customer spending this year could turn into additional spending next year. We’ll have to wait and see.

Net cash is king

What really sets Celebrus apart however, is its balance sheet. The company sits on a net cash pile of around $31m (about £24m), with no debt. To put this in perspective, the current market-cap is about £61.3m. 

That means cash accounts for roughly 40% of the company’s entire valuation. This is an unusually high figure for a growth-focused tech stock. By 2027, net cash is projected to reach £41m, just £20m shy of the current market-cap.

This cash buffer offers significant protection for shareholders and gives Celebrus the flexibility to invest in growth or weather any further macroeconomic turbulence. Most small-cap tech firms are forced to rely on debt to fund expansion.

Growth and risks

Celebrus’ technology — which enables real-time, granular customer data capture and analysis — is protected by patents until 2034. The company’s shifting from perpetual software licenses to a subscription-based model, which may temporarily slow revenue growth but should drive more predictable, recurring income over time.

However, the broader market for customer data platforms is forecast to grow at nearly 28% annually until 2033, giving Celebrus a substantial runway for expansion. 

Despite Celebrus having a clear niche platform, competition’s fierce. What’s more, the company’s exposed to customer spending cycles and as an AIM-listed stock, it may also be overlooked by many institutional investors, which can contribute to its persistent discount.

The bottom line

At 8.6 times forward earnings, and with a debt-free, cash-rich balance sheet, Celebrus could be fundamentally mispriced in its sector. Of course, investors are going to want to see this revenue contract turnaround soon though. If it does, the stock could shoot higher. If it doesn’t, the share price may languish where it is, at around 150p.

I took a leap of faith and added this one to my portfolio recently.

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So what companies have I caught my eye? Well, here are some I’ve added to the watchlist: The Pebble Group, Card Factory, Keller Group, Yü Group (LSE:YU), and Celebrus Technologies (LSE:CLBS).

Yü Group

Yü Group’s delivered an extraordinary performance, with its share price up over 1,300% in five years. The company supplies energy and utility services to UK businesses and continues to post strong growth.

In 2024, revenue jumped 40% to £646m, with adjusted EBITDA up 11% to £48.8m. The company’s ability to secure contracted revenue offers impressive visibility. It already has £566m locked in for 2025.

As we can see in the above table, the forward metrics are positive. Basic EPS is forecasted to climb from 222p in 2024 to 266p in 2026. Meanwhile, the dividend’s also on a steep upward trajectory. It’s expected to rise from 60p in 2024 to 95p by 2027, equating to a prospective yield of 5.1%. 

Moreover, Yü Group’s net cash position’s particularly impressive. It had £80m at the end of 2024, and this is forecasted to reach £117m in 2025 and £168m by 2027.

The stock looks very cheap, especially when we account for net cash. This valuation discount may reflect concerns over energy price volatility, execution risk as the business scales, and the competitive nature of the UK energy market.

Celebrus Technologies

Celebrus Technologies operates a disruptive data platform. It’s a sector where US peers often command lofty valuations. Yet Celebrus trades at an EV-to-EBITDA ratio of just four times, a fraction of the sector average.

Despite a recent warning of a dip in revenue for 2025, adjusted pre-tax profits are set to rise, thanks to higher-margin software sales and tight cost controls. It also boasts $31m in cash and no debt, with projections suggesting net cash could reach $54m by 2027.

There are several risks here. Firstly, there are a number of companies in this disruptive space. Customer spending delays due to US trade policy may negatively impact sales further. Moreover, as a very small-cap, AIM-listed stock, liquidity can be thin and the business may be overlooked by larger investors.

Nonetheless, I believe the valuation, balance sheet, and long-term prospects are deserving of additional investor attention. I’m keeping a close eye on it.

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Celebrus appears very cheap

Celebrus currently trades at an EV-to-EBITDA ratio of just four times — that’s far below the sector average and its US-listed peers. For context, global AI and data giants like IBM, Accenture, and Infosys are valued at 15 to 18 times EV-to-EBITDA, while high-growth names in cybersecurity like CrowdStrike and Snowflake fetch multiples as high as 94 times and 115 times, respectively. The sector average sits around 33 times.

So why the discount? Recent trading updates offer some clues.

Revenue set to disappoint, but it’s not all bad

On 22 April, Celebrus warned that full-year 2025 (FY25) revenues are expected to come in at $38.6m, down from $40.9m in FY24. The company cited a slowdown in customer decision-making amid an “increasingly uncertain” global geopolitical environment as the main culprit. 

Despite the revenue dip, adjusted pre-tax profits are set to rise to $8.7m, up from $7.6m last year, thanks to higher-margin software sales and tight cost controls. That’s certainly positive and something that should be accounted for in forecasting for 2026 and 2027.

Building on this, there’s certainly cause to believe that Celebrus is undervalued. The company is in great shape financially, sitting on $31m in cash and no debt. This provides a solid buffer to weather near-term uncertainty.

But this also contributes to that very attractive EV-to-EBITDA ratio, as mentioned above. The net cash position is projected to reach around $54m by 2027. For context, that’s around £41m at the current exchange rate and only £27m below the current market cap.

I’d add that it can be a rarity to find growth-oriented small-cap stocks with oodles of cash. Typically, these companies have to use debt to fund growth. That’s not an issue here.

Analyst sentiment: significant potential

Despite recent operational weakness — Celebrus shares are down over 40% from their 52-week high and have underperformed the FTSE All Share index by 42% in the past six months — analysts remain bullish. The consensus price target is around 460p, implying the stock could be undervalued by as much as 170%.

The bottom line

I think Celebrus Technologies may offer rare value in a space where stocks are typically very expensive. Moreover, with a rock-bottom EV-to-EBITDA multiple, strong cash position, and a pivot toward higher-margin, recurring software revenues, it could be a very interesting prospect to consider.

As always, risks remain, especially around customer spending and contract transitions. What’s more, as an AIM-listed stock, it may simply be going under the radar. It could be better placed with a US listing.

However, some investors will argue that the deep discount may more than compensate for the uncertainty. For now, it’s a stock I’m going to watch closely.

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