However, this just means we need to look harder for undervalued stocks. With that in mind, here are two small-cap stocks that don’t appear undervalued.

Synectics: solid growth, attractive value

Synectics (LSE:SNX) delivered a 35% rise in first-half revenue to £35.5m and a 59% jump in adjusted earnings per share (EPS) to 16.4p. And despite the stock surging over the past 12 months, it’s now trading at just 12.2 times forward earnings.

That multiple falls to 9.5 times by 2027, reflecting continued earnings growth expectations. At the same time, net cash is already £12.1m — a substantial figure for a company with a £52m market-cap. Forecasts for net cash suggest it will hit £12.4m by 2027, although I’d expect it to hit that figure quite soon.

Meanwhile, the dividend yield’s set to climb steadily from 2.3% to 3.3%, reinforcing shareholder value. Contracts with West Midlands Police, a Southeast Asian gaming resort, and Stagecoach, alongside new market entries in the Philippines and UAE, support its expansion story.

A net cash-adjusted price-to-earnings-to-growth (PEG) calculation also supports my bullishness. It’s trading at 12.2 times forward earnings, and analysts expected CAGR earnings growth of 13% (from 16.4p in 2025 to an estimated 22.4p in 2027). Adjusting for net cash (23% of market-cap), the PEG ratio’s roughly 0.72. That’s a clear sign of undervaluation and we haven’t even accounted for the dividends.

However, risks include contract concentration and exposure to cyclical public infrastructure spending. Despite this, with a clean balance sheet and strong valuation picture, it’s a stock I believe is worth considering. I am.

Tracsis: cash rich and expanding earnings

After a difficult 2024, Tracsis (LSE:TRCS) appears to be back on track. Forecasts suggest a return to growth, with earnings per share expected to recover from 1.6p in 2024 to 11.2p in 2027. At the same time, the enterprise value-to-EBITDA is forecast to fall from 6.97 times in 2025 to just 4.93 times by 2027. For a software-driven transport optimisation business with critical infrastructure exposure, this could be an undervaluation.

The company has net cash of £22.9m forecast for 2025, rising to £39.5m by 2027. That’s over a third of its £109m market-cap. Revenue’s expected to grow modestly, while EBITDA margins are holding firm. Dividends are modest, but growing.

The net cash-adjusted PEG’s also attractive. The forward P/E is 42 times, and CAGR EPS is 60% (from 1.6p to 11.2p). Net cash is 21% of the market cap, and this gives us a PEG ratio of 0.55 times. That’s typically very good for software.

Risks remain, especially around earnings volatility and dependence on UK infrastructure spending. However, I believe there’s a lot to like. It’s worth thinking about and it’s on my list.

The post The stock market may be overheating, but these shares don’t look overvalued appeared first on The Motley Fool UK.

Having said that, as the vaccine rollout continues and companies accelerate their recovery, the FTSE 100 has made a bit of a comeback. Over the past 12 months, its price has risen by over 11% and consequently, it’s on the verge of returning to pre-pandemic levels. But even if it can continue delivering these returns moving forward, I’ve spotted three individual growth stocks that I’d buy today instead.

The music industry is back with a vengeance

With the pandemic spreading worldwide, the music sector suffered a major blow as live events, and recording sessions had to be delayed or cancelled. But despite this inconvenience, Focusrite (LSE:TUNE) stormed ahead. The company is a designer and manufacturer of audio equipment and software.

Relatively speaking, this is quite a niche market with a lot of competition. And cancelled live events did disrupt its income from equipment sales and rentals. However, management was more than able to mitigate the impact through its home-studio products.

As such, revenue continued to surge by double-digits, and the stock has followed suit, beating the FTSE 100’s 12-month performance by 53%!

Improving consumer health with flavour

There continues to be increased awareness of general wellbeing, thanks in part to the pandemic. And that’s what brought Treatt (LSE:TET) onto my radar. This chemicals company uses organic materials to create flavours and fragrances for the beverage, consumer healthcare, and perfume industries. Most notably is its work to find sugar alternatives in the fight against obesity.

The group has suffered at the hands of Covid-19 as its supply chains have been challenged. It’s had to contend with inflationary pressures regarding the purchase of raw materials. However, management must have successfully passed these increased costs onto customers because profits are up.

Just like Focusrite, Treatt has also outperformed the FTSE 100 index over the past year, generating a return of 64% for shareholders.

Outperforming the FTSE 100 with electricity

With travel restrictions brought in to slow the spread of the virus, Tracsis (LSE:TRCS) also saw a slowdown in demand for its services, and its profits suffered considerably for it. So it’s not surprising that debt levels are significantly higher today than before the pandemic. But that soon might no longer be a problem.

This group provides a range of transport solution services, including using electrical signals to detect irregularities within railway lines. It’s also a niche target market. But maintaining Britain’s railways remains essential to the recovering domestic travel sector. And with the government planning to upgrade the UK rail network, Tracsis looks like it’s got plenty of growth opportunities ahead.

This is all my opinion, of course. But the market seems to agree. This stock has climbed 57% in the last 12 months, vastly outperforming the FTSE 100 index.

The post These 3 growth stocks have beaten the FTSE 100 hands down in the last year 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.

Christmas lockdown rules are causing increased traffic!

This relaxation of the Covid-19 lockdown is causing a surge in people travelling around the country.

National Express — the UK’s biggest coach operator — stated that since the announcement of the new rules, it has seen a “significant increase in traffic” to their website. Most of the trips booked are travel to and from London.

Network Rail is expecting a similar surge in traffic on Britain’s railway lines and has already begun negotiating with the Department for Transport regarding the increase in the number of running trains over the Christmas period.

Typically, during the Christmas period, large portions of the UK’s rail network is closed to carry out any major maintenance work. Often planned a year in advance, this maintenance is critical to the safe operation of the train network. Thus, it is unlikely to be postponed. However, minor engineering work might be, allowing for an increase in running trains over the period.

But, it is not just public transportation that has seen an increase in traffic. Car use has been slowly climbing over the past few months and is now back to its pre-Covid-19 levels. With safety concerns over public transport and restrictions being temporarily lifted, the number of cars on the road may increase even further.

An opportunity for this tech stock?

All of this is excellent news for the tech stock Tracsis (LSE:TRCS). Tracsis is a technology company operating in the transportation sector. It allows transport operators to run their networks efficiently while simultaneously reducing costs.

Using its proprietary remote condition monitoring (CRM) system, Tracsis can detect irregularities within the railway lines. It reports the issues to an engineering team who can investigate and perform any necessary maintenance before it becomes a severe issue.

The business also engages in the collection and analysis of traffic data. It uses this data to plan optimised routes for trains, cars, and busses within pedestrian-rich areas.

I’ve discussed this tech stock before, highlighting the impact of Covid-19 on its revenue stream. Since then, the company has posted its final results. These risks appear to have materialised in a decline of £10m of revenue from its traffic and data services division.

Despite this reduction, the firm’s second division – rail technology & services – has continued to beat expectations. Revenue increased by 17% combined with an underlying profit boost of 33%. The increase in performance stems from the company’s ability to quickly switch to a remote working scheme, as well as securing a new multi-year contract for their TRACS Enterprise product.

The bottom line

Overall, total revenue came in at £48m — a slight decrease from 2019’s £49.2m. However, this reduction stems from the temporary effects of the pandemic. With multiple Covid-19 vaccines on the way, such effects should begin to subside as we enter the second half of 2021.

When combing this information with the expected surge in traffic over the Christmas period, I believe Tracsis is ‘on track’ to return to its historical double-digit growth.

The post Christmas lockdown: 1 growth tech I think will thrive in December appeared first on The Motley Fool UK.

All are strong businesses, with attractive long-term growth prospects, in my view. Their shares remain temptingly cheap. They’re at discounts of between 16% and 29% to their pre-pandemic 2020 highs. Let me tell you more about them, and see if you agree with my positive assessment.

Bargain UK small-cap stocks #1

Alliance Pharma (LSE: APH) owns the marketing rights to around 80 consumer healthcare brands and prescription medicines. The group had been producing strong sales and profit growth before the pandemic. However, the shares are currently 16% below their pre-pandemic high.

Alliance’s prescription medicine sales will be adversely impacted this year by delays in routine treatments, due to Covid-19. Also, some of its consumer healthcare brands have been hurt by lockdowns. For example, its eye-health supplement MacuShield hasn’t been done any favours by temporary closures of bricks-and-mortar retail outlets and opticians.

However, analysts expect strong growth at the group to resume next year. With products like Kelo-cote — the fastest-growing top five global scar treatment brand — in its portfolio, I reckon Alliance is cheap. It’s valued at 13.7 times forecast earnings, while a prospective 2.2% dividend yield is also decent for a growth company. Its balance sheet is in good shape too, with only a modest level of debt.

Bargain UK small-cap stocks #2

Carr’s Group (LSE: CARR) has an agriculture division supplying animal feeds, supplements and farm machinery. It also runs a UK network of rural stores, providing a one-stop shop for the farming community. Its other division is engineering. This serves a diverse range of industries, including defence, nuclear, oil and gas, and renewable energy.

Last week, the group issued results for its financial year ended 29 August. It reported a number of adverse impacts from Covid-19, such as engineering project delays and restricted access to customer sites. Group revenue was down 2% and underlying earnings fell 18.5%.

Meanwhile, its shares are currently 22% below their pre-pandemic high. This values Carr’s at just 10.5 times its pandemic-depressed earnings. There’s also a 3.8% running yield on its maintained divided. The group has modest debt, and significant growth opportunities within both its divisions. As such, I reckon this is another bargain UK small-cap stock.

Last but not least

Technology company Tracsis (LSE: TRCS) also issued its annual results last week. It reported a 2.5% fall in revenue for its financial year ended 31 July, with underlying earnings down 13.9%.

Its rail technology and services division was generally unaffected by the pandemic. Indeed, it increased revenue by 17%, helped by prior-year acquisitions. However, its traffic and data services division saw an 18% fall in revenue. This was due to some large events and transport data collection projects being either cancelled or postponed.

Tracsis’ shares are trading 29% below their pre-pandemic high. They’re valued at 24.2 times the earnings just reported. However, with almost £18m cash on the balance sheet and no debt, the cash-adjusted earnings multiple falls to 21.7. I think this is cheap for a small-cap technology stock on temporarily depressed earnings. Management remains confident in the medium-to-long-term growth prospects for all parts of the group.

The post Why I think these 3 UK small-cap stocks are bargain buys for 2021 appeared first on The Motley Fool UK.

The AIM-listed company provides software-based technology to the transport industry. And it seems to be a bit of a leader, with an enviable reputation. The company counts Network Rail and the Department of Transport (DoT), along with other government agencies, among its customers.

AIM for a Stocks and Shares ISA?

Before I go further, I want to touch briefly on AIM, the Alternative Investment Market. Some investors will be wary, as it has looser regulation than the main LSE markets. That’s a boon to smaller companies due to lower costs, but AIM is also where too many dodgy firms over the years have ended up burning shareholders. In fact, in the early days, the rules didn’t even allow us to put AIM shares in a Stocks and Shares ISA.

Saying that, we can find some top growth shares on AIM too. Like ASOS with a market cap of more than £4bn. Couple that with a presumption that Tracsis will have had to live up to government standards to get the DoT contract, and I have no AIM-based fears.

Full-year results

So back to Tracsis, and its full-year results released Thursday. Revenue dipped slightly, to £48m from £49.2m. The firm reckons Covid-19 hit revenues to the tune of around £10m, mostly in the Traffic & Data Services division. That division includes large events and data collection projects within its remit, and many of those were canceled or postponed.

Adjusted EBITDA came in flat at £10.5m, but pre-tax profit did fall. We saw a drop from £6.6m in 2019 to £4.1m. Fully diluted earnings per share (EPS) fared better, with a modest dip from 27.42p to 23.66p. Tracsis ended the year with £17.9m in cash, so there doesn’t seem to be any liquidity problem. And liquidity is a key factor in my Stocks and Shares ISA choices.

The second half has obviously hit the company’s growth expectations. But at the halfway stage to the end of January, just weeks before the pandemic overwhelmed us, growth was strong. Revenue was up 41%, with adjusted EBITDA up 23%. I see that as underlying strength, which I value in a Stocks and Shares ISA.

Growth and dividends

With the coronavirus downturn in full swing, Tracsis wisely decided to defer its interim dividend pending later review. Well, there’s not going to be a dividend now.

But I think that’s fine. And I reckon there’s every reason to expect dividends to get back on track next year. It’s not a lot of cash to do without anyway, as the dividend had only been yielding 0.3%. So, not my typical Stocks and Shares ISA pick by a long way.

But even though the dividend has been modest, Tracsis has already implemented a progressive strategy. At this stage in a growth company’s life, I rate that as a very positive thing. I see Tracsis as a strong growth buy today, hopefully blossoming into a rewarding income stock in years to come.

The post I’d buy this small-cap growth stock for my Stocks and Shares ISA now appeared first on The Motley Fool UK.

Tom Rodgers: Sylvania Platinum

Sylvania Platinum (LSE: SLP) is one of those stocks I think will become increasingly strategically important. The platinum group metals the company processes at a low cost from its base in South Africa are used in practically every modern electrical appliance. Prices for rhodium and palladium have rocketed to near all time highs this year as demand outstrips supply.

With $55m cash and no debt, profits and earnings per share both doubling from 2019 to 2020, and investors in line for a special windfall dividend in 2021, this is one of the most obvious micro-cap no-brainers I’ve seen for years. 

Tom Rodgers owns shares in Sylvania Platinum.

Zaven Boyrazian: Tristel

Throughout 2020, medical centres around the world have adopted far more rigorous cleaning standards. In light of recent news, a Covid-19 vaccine may soon be ready.

However, even after this pandemic comes to an end, the increased disinfecting practises are likely to continue with stricter legislation. This creates a vast opportunity for Tristel (LSE:TSTL).

The firm manufactures infection prevention products that are widely used throughout hospitals. Given each of their products are consumables, they create a recurring income from existing customers.

As all products require FDA approval, Tristel faces little competition within a rapidly expanding market space.

Zaven Boyrazian does not own shares in Tristel.

Kirsteen Mackay: Tracsis

Tracsis (LSE:TRCS) is a UK tech stock that makes software specifically designed for the transportation industry, with railways being a main beneficiary. The company has been publicly listed for 13 years and its share price has risen approximately 1,075% during this time.

With the pandemic pausing travel, this has caused a sharp shock to the company, but it’s still winning government contracts. Although the Tracsis share price has seen extreme volatility this year, I think it will renew its growth trajectory once normality resumes. It has a £150m market cap. Its price-to-earnings ratio is 28 and earnings per share are 17p. 

Kirsteen does not own shares in Tracsis.

Edward Sheldon: Cerillion

My top micro-cap stock for November is Cerillion (LSE:CER). It’s a leading provider of cloud-based (SaaS) billing, charging, and customer management systems.

Cerillion appears to have plenty of momentum at the moment. In October, the group advised that trading in the second half of the year ended 30 September was strong. During this period, the company signed its largest-ever contract. Meanwhile, it said that its back-order book was at record highs and that it expects revenue and adjusted EBITDA for the year to be ahead of current market expectations.

At the time of writing, Cerillion has a market cap of under £100m, meaning there’s plenty of potential for growth. All things considered, I think this micro-cap stock looks pretty exciting.

Edward Sheldon has no position in Cerillion.

Rupert Hargreaves: Inspecs

I have my eye on UK-based designer, manufacturer and distributor of eyewear frames, Inspecs (LSE: SPEC).

The UK eyewear market is vast, and it’s only expected to continue to expand over the next few decades. This growth is projected to show through in Inspecs’ top line next year. Sales set to jump by a third in the next two years.

A cash-rich balance sheet could also hint at the prospect of large dividends from this consumer-focused business.

In my opinion, as Inspecs’ sales expand over the next few years, the stock has the potential to jump higher.

Rupert Hargreaves does not own shares in Inspecs.

Royston Wild: Bloomsbury Publishing

Bloomsbury Publishing is a share I’d buy today and hold for all time. It’s not just the eternal appeal of the Harry Potter franchise which makes this UK share a great long-term buy. I’m also encouraged by the huge profits potential of its move into academic publishing.

Bloomsbury’s shares recently soared to their most expensive since February on some blowout trading numbers. First-half earnings clocked in at twelve-year highs as sales of the publisher’s online books and e-books rocketed. The performance of its digital academic products was also impressive as institutions switched to remote learning due to the pandemic. As a consequence sales of these particular products surged by almost half year on year.

With organic sales rocketing, and its cash-packed balance sheet also creating chances for more profits-boosting acquisitions, I reckon Bloomsbury is a terrific buy right now.

Royston Wild does not own shares in Bloomsbury Publishing.

Kevin Godbold: MPAC

Global packaging company MPAC (LSE: MPA) aims to become a market leader in the “pharmaceutical, healthcare, food and beverage sectors.”

I think MPAC’s niche in those defensive sectors looks attractive. The business is bouncing back from the first wave of Covid-19 lockdowns. And in September the directors announced an acquisition in the US, followed in October by the relaunch of the MPAC brand along with a new corporate website.

City analysts expect earnings to resurge more than 50% in 2021. And with the stock near 400p, the forward-looking earnings multiple is just below 11. With growth on the agenda, I’d buy the micro-cap stock for November and beyond.

Kevin Godbold does not own shares in MPAC.

Jonathan Smith: Oxford Metrics

Oxford Metrics (LSE: OMG) is a UK based software and data analytics company, with offices worldwide. It has an asset management software arm called Yotta, that has been performing very well in recent times. I feel the business is well set to perform well even during an extended pandemic situation. The firm has no debt, and cash balances of over £14m as of Q2 2020. 

The nature of the business also means strong ‘annualised recurring revenue’, that was up 14.6% versus last year. This should aid continued growth in the future. The share price has doubled in value over the past 5 years.

Jonathan Smith does not own shares in Oxford Metrics.

Roland Head: Brickability

Recent results suggest the housebuilding market is enjoying a rapid recovery from the COVID-19 slump. One company I think could benefit from this strong demand is Brickability (LSE: BRCK).

This £115m firm sells bricks, roofing, and other building materials to housebuilders. Growth areas include heating, plumbing and doors. Chairman John Richards says that the company is seeing a “V shaped” recovery and the firm has just issued a solid set of half-year results.

The shares trade on just seven times 2021 forecast earnings and offer a well-covered 5% yield. I’d be happy to buy at these levels.

Roland Head does not own shares in Brickability.

Paul Summers: Churchill China

With things looking positive on the coronavirus vaccine front, my pick of the micro-cap stocks this month is ceramic tableware supplier Churchill China (LSE: CHH). 

Naturally, the £140m cap has seen its revenue, profits, and share price walloped by the virtual shutdown of the hospitality sector in 2020. However, I think the potential rewards now outweigh the risks.

While a full recovery won’t be immediate, earnings are expected to bounce back in 2021 as pubs, restaurants and hotels reopen. In the meantime, this high-quality, ‘family-owned’ company has cut costs where it can and remains debt-free.

Paul Summers owns shares in Churchill China.

Matthew Dumigan: Tatton Asset Management

Since flotation in 2017, shares in Tatton Asset Management (LSE: TAT) have been rather volatile. However, over the three years, the company’s share price has risen 45%, delivering a tidy return to investors. 

The company provides a range of on-platform only services ranging from discretionary fund management and compliance to mortgage provision. What’s more, the firm’s recent half-year results report was positive, with group revenue increasing by 12.6% year-on-year and adjusted operating profit rising by 21.9%.  

Ultimately, I’m impressed by the company’s earnings growth and I reckon Tatton can continue to deliver a strong performance in the years to come.  

Matthew Dumigan does not own shares in Tatton Asset Management.

G A Chester: Trans-Siberian Gold 

Trans-Siberian Gold (LSE: TSG) is a small but profitable miner with ambitions of becoming a premier mid-tier operator. Its strategy is to maintain a strong balance sheet, while both investing in growth opportunities and paying a base level of sustainable dividends through the commodities cycle. 

The base level’s set at around $3m a year (a 2.5% yield at the current share price), but the company regularly distributes more. This year’s interim dividend alone was $7m (5.9% yield). 

With its growth prospects and record of distributing surplus cash to shareholders, Trans-Siberian Gold is my top pick in the smaller companies space. 

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

James J. McCombie: Surface Transforms

Surface Transforms (LSE: SCE) recently won a contract worth £27.5m to supply an eighth global automotive customer with its high-performance carbon-ceramic brake discs. As a result, revenues should quadruple to £8m in 2022 versus 2020, and earnings per share should turn positive.

The high-performance brake market is worth £200m and growing, but a single supplier is dominant. Surface is now a credible alternative for manufacturers looking to diversify, and I think it will increase its market share significantly. 

Since electric vehicles need brake discs, Surface also looks good for the long-term, and I think it’s a great micro-cap stock pick.

James J. McCombie owns shares in Surface Transforms.

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The tech stock opportunity

Tracsis (LSE:TRCS) is a software solutions business for the transportation industry. It uses innovative technologies to increase the performance of UK transport operators while simultaneously reducing expenses.

Since its IPO in 2007, the company has built up its reputation within the sector. Today it serves some of the largest transport operators and authorities – including Network Rail, and the Department for Transport among other government agencies.

The business can be broken down into two segments that roughly generate a balanced proportion of revenue.

The Rail Technology & Services segment allows its clients to use its proprietary Remote Condition Monitoring (RCM) system. RCM continually monitors the electrical pulses travelling down railway lines to detect any irregularities in real-time. If a problem is detected, the railway operator can send in a team of engineers to further investigate the issue and perform any necessary maintenance before it evolves into a severe problem.

The second segment is Traffic & Data Services, which is responsible for a slightly higher proportion of the revenue stream. The firm engages with clients in the collection and analysis of traffic data. Using geographical information systems (GIS), clients can painlessly perform traffic and parking management for popular events. These data services are further extended to local authorities for better transportation route planning within rail, traffic, and pedestrian-rich environments.

The financials and risks ahead

The tech stock has flourished over the past five years, with annual revenue almost doubling to £43m in 2019. However, the 2020 interim report suggests that revenue growth is accelerating. The first two quarters of 2020 reaped £26.4m alone – 41% higher than the previous year.

This growth primarily originates from the Traffic & Data Services segment of the business. Tracsis secured a new multi-year contract in Ireland, as well as profiting from the vast array of planned events in the second half of 2020.

However, this growth may be short-lived, at least temporarily. The Covid-19 pandemic has led to many events being cancelled or postponed for the foreseeable future, and with it goes the increased revenue.

Fortunately, the Rail Technology & services segment has been able to transition to a remote working approach and thus can continue to carry the business forward throughout the pandemic.

The bottom line

So far, the majority of growth achieved by the firm stems from acquisitions, rather than organic growth. But this may soon change.

Tracsis has begun expanding into North America, which presents an enormous opportunity for the Rail Technology & Services segment.

Here in the UK, the National Rail network consists of approximately 10,000 miles of rail tracks. North America has over 140,000 miles. The US expansion is a slow process with ongoing paid trials among transit operators.

Tracsis is on my watchlist and if it’s successful, then I think my portfolio could see explosive returns from this tech stock.

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In today’s half-year results report, small-cap software and services provider Tracsis (LSE: TRCS) revealed a strong balance sheet – a cash position of £26m as of 31 January and zero borrowings. That sum compares with annual revenue for the trading year to July 2019 of just over £49m and operating profit of almost £7m. That’s a reassuringly large pile of money!

I’d describe the company as being well-financed, which augurs well for surviving the current coronavirus crisis. Just to be sure, the directors have deferred payment of the interim dividend, which will keep £0.3m in its coffers for the time being.

However, when there’s “more clarity” about the ongoing effects of the pandemic on the business, they’ll review the situation. And one possible outcome is the combination of an interim and full-year dividend for the full trading year. Another is the retention of cash in the business “to invest in future growth opportunities.”

Effective acquisitive growth

And that’s what the firm’s good at. An acquisitive growth programme has propelled shareholder returns. Eight years ago, the stock was changing hands for around 67p. Today, it’s at 581p and topped out around 800p in early March before the recent plunge.

I’d have been happy with returns like that and believe there’s more to come from the firm, perhaps much more.

Tracsis built its niche providing software, hardware and services for the rail, traffic data and wider transport industries. Chief executive Chris Barnes said in today’s report that despite the Covid-19 crisis, the Rail Technology & Services division has been “resilient.”

But the Traffic & Data Services division is being “majorly impacted.” However, the firm has taken “a series of actions” aimed at reducing the damage to the business as much as possible.

To put that in perspective, during the last full trading year, around 70% of profit before tax came from the Rail Technology & Services division, and 30% from Traffic & Data Services. Overall, it seems Tracsis is in a good position to trade through the crisis with a contained hit to profits.

During the period, the 2019 acquisitions of Compass Informatics, CTM and Bellvedi “performed well.” And post-period on 10 March, the company acquired iBlocks Limited, a UK-based software company specialising in solutions for the rail industry. The firm’s expansion continues and the outlook is positive.

The growth story remains on track

Looking ahead, the directors are “confident” about the long-term prospects for the business “post-Covid-19.” Profits will likely reduce in the second half of the current trading year because of the crisis. But there are also “positive growth drivers” in the transport markets that the company serves.

For what it’s worth, the company started the first half of its trading year with strong trading. Revenue rose by 41% in the period compared to the equivalent period the year before. And adjusted like-for-like EBITDA elevated by 23%.

I like the look of this one and see the current dip in the share price as an opportunity to research the stock with a view to buying some of the shares for the long haul.

The post Forget BT! I’d buy this technology share with ‘survive and thrive’ written all over it appeared first on The Motley Fool UK.

I’ve written about Vodafone a number of times since, suggesting in May, when the shares were trading at 124p, that investors could double their money. With the shares now at 162p, and Tracsis’s at 622.5p (up 3% today, following the release of its annual results), it seems like a good time to review.

I’ll look at Tracsis first, before turning to my headline question: “Do I still think the Vodafone share price could double your money?”

Very buyable

Tracsis describes itself as “a leading provider of software, hardware, and services for the rail, traffic data, and wider transport industries.” One of the things I like about the business is that I see strong structural drivers for growth in the areas it specialises in, due to rapid urbanisation, rising demand for intelligent transport solutions, and enhanced safety.

It’s no surprise, then, that the company today reported a very healthy 24% increase in revenue to £49.2m for its financial year ended 31 July. This came from a combination of organic growth of 9% and growth from acquisitions of 15%.

Operating profit before exceptional items increased 13% to £6.7m, earnings per share (EPS) rose 7% to 28.25p, and the board lifted the massively covered dividend 13% to 1.8p. Impressively, Tracsis has no borrowings, and ended the period with a cash balance of £24.1m, up from £22.3m, despite spending £6.8m on three acquisitions during the year.

The table below puts the current valuation of the company in the context of the previous years when I covered its results:

I’ve said for the last two years the shares look very buyable to me, and I say it again this year, with the cash-adjusted price-to-earnings (P/E) ratio at 19.1.

Mixed news

Vodafone’s half-year results for the six months ended 30 September, released earlier this week, contained mixed news. The headline was a statutory loss of €1.9b. Management said this “primarily reflects losses in relation to Vodafone Idea post an adverse judgement against the industry by the Supreme Court in India.”

Whatever the outcome of the company’s active engagement with the government to “seek financial relief for Vodafone Idea” – and indeed it’s future in the country – I don’t think it’ll ultimately derail the prospects of what is an internationally diversified telecoms behemoth.

The positives in the results included organic revenue growth of 0.7% in Q2 (a strong rebound from a 0.2% decline in Q1), and an upgrading of management’s full-year guidance on earnings before interest, tax, depreciation, and amortisation (EBITDA). The company now anticipates EBITDA of €14.8b to €15.0b (previously €13.8b to €14.2b).

Plenty of upside

In contrast to Tracsis, Vodafone carries hefty net debt (€48.1b at the period end), and this year’s forecast EPS of 8.3p (giving a P/E of 19.5) only thinly covers an anticipated dividend of 7.8p (4.8% yield).

I don’t see investors doubling their money in short order from the current share price. However, with City analysts forecasting EPS growth in excess of 20% next financial year, I believe there’s still plenty of upside for the shares, and I’d be happy to buy them at today’s level.

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