3 small-cap shares with stunning growth potential

Royston Wild looks at a handful of small caps with exceptional earnings potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I believe a robust US economy should continue to propel demand for the promotional materials created by 4Imprint Group (LSE: FOUR) in 2017 and beyond.

4Imprint saw sales of its branded T-shirts, pens and other nick-nacks shoot 17% higher during January-June, to $270.2m. Total like-for-like trading was 15% ahead of the corresponding period in 2015. And in a promising update last month, the firm announced that “further organic revenue growth has been achieved” since the beginning of August.

The marketing giant generates 96% of total sales from North America, making it relatively immune to any adverse Brexit-related troubles in the months and years ahead.

City analysts certainly expect earnings at 4Imprint Group to keep shooting higher, and expect earnings growth of 23% and 11% for 2016 and 2017. While these readings create slightly-heady P/E multiples of 21.3 times and 19.2 times, I believe this is a snip considering 4Imprint’s exceptional revenues momentum.

Building beauty

But for those seeking hot growth at bargain-basement prices, I reckon building products provider Tyman (LSE: TYMN) more than fits the bill.

A sleepy US residential market is showing signs of finally cranking into gear, with construction spending hitting seven-month tops in October and driven by a 1.6% rise in residential-related expenditure. And Tyman is banking on recent acquisitions, new product lalunches and organisational improvements to keep driving the top line, even if macroeconomic turbulence troubles its other regions.

Tyman’s broad geographic diversification has already made it a reliable deliverer of sizeable earnings growth year after year, and the City expects this to continue with bottom-line expansion of 12% in 2016 and 13% next year.

Not only do such projections create modest P/E ratios of 11.6 times and 10.2 times — well below the benchmark of 15 times widely considered attractive value — but this year’s PEG rating is bang on the value yardstick of one. And this slips to an even-better 0.8 for 2017.

A shoe in

I’m convinced that electric demand for Jimmy Choo’s (LSE: CHOO) fashionable footwear should also underpin stunning earnings growth in the years ahead.

The company continue to face up to the difficulties enveloping the global luxury market, and commented last month that “Jimmy Choo is seeing revenue growth driven both by new store openings and by improving retail trading in all regions.” And the label is looking to capitalise on huge pent-up demand in Asia by aggressively expanding its shop network there — regional sales of its shoes (excluding Japan) climbed by almost a quarter during January-June.

The number crunchers share my optimistic view of Jimmy Choo’s bottom line, and have pencilled-in a 33% earnings rise in 2016. And an extra 24% bump is predicted for next year.

These projections  push a P/E multiples of 20.3 times for the current year to 16.4 times in 2017. Meanwhile, PEG ratios of 0.6 and 0.7 for 2016 and 2017 suggest that Jimmy Choo is great value at current prices.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »