If you want to see share price growth then often it’s better to go looking for that among smaller companies. For the largest companies, growth is possible, but it’ll often be slower.
That’s why I’ll look at two shares from outside the FTSE 100 in this article. Mpac (LSE: MPAC) is a packaging company, and Computacenter (LSE: CCC) is an IT reseller.
Improving company
Turning our attention firstly to Mpac, this is a company that has been held back mainly by two factors. One is beyond its control — that’s investor perceptions of packaging and plastics. This shift has held back many packaging companies’ share prices. The second issue is a pension liability that has scared investors. It will likely be gone within the next couple of years, however.
There’s a lot of potential for the shares to move higher. They are only on a P/E of around eight. One catalyst could be its US acquisition. Mpac is paying $13m in cash for Switchback, a supplier of packaging machinery and automation solutions to the food, beverage and healthcare markets. The deal comes with a further earn-out consideration of $2m to be paid, depending on performance.
Another boost for Mpac could be technology. In 2019 the group acquired Lambert Automation, an established automation solutions provider to the medical and consumer healthcare markets. The value of this technology doesn’t seem to be reflected in the share price, given how automation will be transformative to the industry in the coming years.
The company’s share price hasn’t reacted strongly to positive updates from management. That indicates to me it could be a bit of a hidden gem that could see rapid share price growth in the next few years.
Computacenter: strong share price growth
When it comes to Computacenter, 2020 to date has been a very positive year. The share price has been buoyed by investor appetite for technology-related shares. Operating in the IT industry and benefiting from the rise in working from home, Computacenter has found itself in the right place at the right time.
That makes the shares risky in some ways as they’re now on a P/E of nearly 26. However, I do believe the shares could rise further. Business is booming. In its half-year results last month, Computacenter revealed a 39.4% increase in first-half profit. Its interim dividend was lifted by 21.8% to 12.3p a share.
The company has acquired Canada’s Pivot Technology for C$105.8m (£62m) to expand in the US and Canada. This could be a source of growth as the group has traditionally had the UK and Germany as its largest markets.
The trends underpinning Computacenter’s growth aren’t going away. Companies are increasingly competing using technology and require the expertise of resellers to provide the best devices, software and other equipment. I think Computacenter has the right ingredients to fly and that’s why I think there will be significant share price growth in the coming years.
