Since then, the value of the business — which operates in two very disparate markets (respiratory protection systems and milking point solutions) — has increased a very satisfying 36%.

Should those who benefited from the rise now consider jettisoning the stock from their portfolio? Not if today’s pre-close trading update is anything to go by.

Fair value?

According to management, trading in the second part of the financial year has “continued to be strong“, with expectation around profits for the full year likely to be met. 

Over at the company’s Protection division, revenue growth for the 12-month period is expected to be roughly 7% at constant currency, supported by recent orders from the US Department of Defence. A total of 182,000 masks are expected to be shipped to this client in the current financial year. 

Elsewhere, the company continues to sell its products to those working in law enforcement with growth being recorded “across the portfolio in all geographies”. It would seem, however, that this performance hasn’t been replicated in the “tougher” Fire market.

In dairy, Avon has seen improved trading in North America (a key market) over the second half of the year. Revenue growth in 2017/18 is now expected to be around 4% at constant currency.  

A rise of almost 2% in early trading suggests the market is satisfied with these numbers. That said, I’m not sure I’d add at the current time if I already owned a slice of Avon. At 19 times earnings for the next financial year, I don’t think it’s unreasonable to suggest that the Melksham-based company is approaching fair value, although some may not agree given its ongoing growth. 

But I would not sell. With management talk of a “strong order book” and the firm being “well positioned” to continue growing in 2018/19, a (more) gentle ascent could still be on the cards. To me, Avon Rubber looks a solid hold right now.

Another strong riser

Of course, Avon isn’t the only small-cap that’s performed for investors in recent months. In January, I profiled bio-decontamination equipment supplier Bioquell (LSE: BQE), suggesting that the positive momentum witnessed in 2017 would likely continue.

Priced at 342p back then, the shares now change hands for 550p. That 60% gain in under eight months neatly summarises why small-cap growth stocks remain such a draw for private investors prepared to endure increased volatility for the prospect of swifter capital gains. 

July’s interim results gave a snapshot of why this minnow is now appearing on more investors’ radars. Despite currency headwinds, total revenues rose by 13% at constant currency to £15.7m over the six months to the end of June while pre-tax profit roared ahead by 41% to £2m.

Having disposed of non-core assets, Bioquell has now positioned itself for “more predictable revenues and higher quality earnings”, according to Executive Chairman Ian Johnson. Indeed, it now expects to exceed analyst predictions on full-year profit.

The only downside to all this is that the shares look even more expensive than before. At 45 times forecast earnings before today, investors will need to be very confident that Bioquell will keep its word. 

While I wouldn’t necessarily dispose of the stock just yet, it does pay to remember that high expectations frequently result in eventual disappointment. 

The post Time to sell these high-flying small-cap growth stocks? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Avon Rubber. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Branded spirits and liqueurs company Stock Spirits Group (LSE: STCK) proved to be a great investment for shareholders during 2017. The shares rose around 56% to trade at today’s level close to 279p, but the firm still displays attractive metrics for quality, value and momentum, and I believe the stock warrants close attention now.

Today’s full-year results are encouraging. Constant currency revenue rose 3% during 2017 compared to the year before and adjusted basic earnings per share shot up more than 14%. In a sign that cash inflow backs profits, net debt closed down 11% for the year at just over €53m. The directors displayed their confidence in the outlook by pushing up the total dividend by almost 5%.

It’s all about brands

The firm offers a portfolio of products in Central and Eastern Europe that “are rooted in local and regional heritage.” Core operations cover Poland, the Czech Republic, Slovakia, Italy, Croatia and Bosnia & Herzegovina, but exports also go to more than 50 other countries around the world. Something is going right because sales volumes increased by 6.5% in 2017 and global sales volumes total more than 100m litres per year. 

When I think of Stock Spirits, I dream of it growing to become the next Diageo, and chief executive Mirek Stachowicz said in today’s report that after a strategic review the directors aim to focus more on its brands “to keep pace with the changing needs and tastes of our end consumers.” The idea is to “premiumise” the brands so that they become “more relevant to millennials.”  Planned tactics to achieve that include investing in digital marketing and adding new brands via carefully selected acquisitions.

A focus on brands is certainly what made Diageo mighty, but Stock Spirits may have a fair distance to travel if it is to expand its trading footprint further with its brands such as Stock, Fernet, Limonce, Zoedkowa, Saska, Keglevich and Zoedkowa. For now, the firm’s stated goal is to “become Central and Eastern Europe’s leading spirits business.”  Much of 2017’s share-price progress seemed to be driven by a recovery that the company engineered in its operations in Poland. With that recovery in place, I agree with Mr Stachowicz’s comment that Stock Spirits is now “well positioned to achieve sustainable long-term growth.”

Simplification of operations

Meanwhile, full-year results from bio-decontamination and containment equipment manufacturer Bioquell (LSE: BQE) confirmed that the growth story remains on track for the firm. Since January 2017, the stock is up around 130%, driven by an impressive recovery in earnings.

During the year, the firm sold its airflow service business to concentrate on its core bio-decontamination operations, which now provide the majority of revenues. There is a residual business in the area of defence, but the directors expect the full benefits of an increased focus on bio-decontamination to show up in the results for profit during 2018.

I think that concentrating on a narrow area of operations is almost always a good thing and expect Bioquell to deliver growing profits in the years ahead. Executive Chairman Ian Johnson told us in today’s report that the company has invested in sales and marketing to “maximise” its potential in the international Life Sciences and Pharmaceutical market.

The post 2 ‘secret’ growth stocks to watch right now appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Expectations-beating

With a market capitalisation of just £80m, it’s not surprising if many market participants are unfamiliar with bio-decontamination and containment equipment supplier Bioquell (LSE: BQE). This could be all set to change.

Over the last year, the Andover-based company’s stock has climbed almost 170% in value — yet another demonstration of just how profitable small-cap investing can be if you pick the right stocks at the right time.

While some may claim that the ‘easy money’ has already been made, I’m not so sure. Based on recent trading, it looks like positive momentum seen over the last six months could continue for some time to come.

This month’s trading statement revealed that revenues for the 2017 financial year would be ahead of management’s previous expectations at roughly £29.3m — a 9% rise on the £26.8m achieved in 2016. Even better, the company now predicts that its pre-exceptional earnings before tax will now be significantly ahead of market expectations.

Aside from these encouraging numbers, Bioquell boasts a solid balance sheet with a net cash position of £14.5m at the end of last year. Free cash flow has become healthier over the last couple of years as a result of a reduction in capital expenditure. There’s no dividend right now but this is perhaps to be expected. 

Bioquell confirms its full-year numbers in early March. With its relatively small free float (the proportion of shares in the hands of investors), expect further good news to push the share price firmly onwards and upwards.

“Exceptional” growth

E-learning solutions provider Learning Technologies (LSE: LTG) is another company that’s put in solid gains recently. Its shares have already climbed 55% in value since I last looked at the company in September.

As a result of “exceptional” organic growth and a contribution from a new acquisition, last week’s pre-close update revealed that group revenue would now come in no less than £51.8m — an 83% rise on the £28.3m achieved in 2016. Adjusted earnings before interest and tax (EBIT) are also expected to be “materially ahead” of market expectations of at least £14m — a 100% increase. Based on current performance, it seems the company is well on the way to realising its goal of delivering run-rate revenues of £100m and run-rate EBIT of £25m within the next three years.

With the company’s order book becoming increasingly populated with blue-chip firms and national governments, a promising pipeline of acquisitions and £1m in net cash at the end of December (compared to 38.5m of net debt at the end of 2016), Learning Technologies looks an ideal pick for risk-tolerant growth aficionados.  

Like Bioquell, the company will provide its full-year figures to the market in March. 

Only your watchlist?

So, why not simply buy the shares if I’m keen on them? In a word, valuation.

Thanks to their superb performance over recent months, neither Bioquell nor Learning Technologies come cheap. At 31 times and 39 times forecast earnings respectively, a lot of good news appears already priced-in, suggesting that it might be prudent for prospective investors to consider waiting for short-term traders and early holders to depart with their profits before building a position. 

The post 2 hot growth stocks I’ve added to my watchlist appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Clearly, it has been a challenging period for the business. However, following major investment in its pipeline, the company’s outlook looks set to improve. This could make it a strong growth play for the long run, but it’s not the only stock that could offer impressive returns. Reporting on Tuesday was another healthcare industry company which could be worth buying today.

Improving performance

The company in question is specialist biodecontamination products provider Bioquell (LSE: BQE). It delivered a positive trading update which showed that revenue for the full year will be ahead of its previous expectations. It is expected to be around £29.3m, which is a significant improvement on the prior year’s figure of £26.8m.

Within that figure of £29.3m, around £28.6m is from the biodecontamination business. This represents a growth rate of 13% versus the previous year. The remaining £0.7m is from the defence business, where revenues fluctuate significantly from year to year.

Pre-exceptional earnings are due to be significantly ahead of market expectations. This could be a key reason why the stock price of Bioquell increased by around 12% following its update. With the company expected to report a further rise in its bottom line of 10% in the current year. This could help to stimulate investor sentiment towards the company and allow it to post further gains following its share price rise of 130% in the last year.

High total returns

Of course, Bioquell lacks the diversity, size and scale of AstraZeneca. Therefore, the larger of the two healthcare companies could offer a stronger overall risk/reward ratio. With the stock trading on a price-to-earnings (P/E) ratio of 18, it seems to offer a fair price for the long term. It also has a dividend yield of 4.1%, with shareholder payouts being covered 1.4 times by profit. This suggests that they are highly sustainable at their current level and could rise at a relatively fast pace over the long run.

While AstraZeneca may not be a particularly popular stock at the present time, a changing outlook for stock markets could make it a more in-demand company to own. With investors currently focused on cyclical growth stocks, defensive companies which do not have high positive correlation with the rest of the economy are relatively unpopular. This could therefore provide an opportunity for investors to buy them at low prices and achieve relatively high total returns.

With the healthcare sector being highly defensive and offering a high degree of diversity, both AstraZeneca and Bioquell could be worth buying for the long term.

The post AstraZeneca plc isn’t the only high-growth stock I’d buy today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in AstraZeneca and Bioquell. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you are invested in it, though, you may well wonder whether it is time to cash in and invest proceeds into GlaxoSmithKline (LSE: GSK), whose stock is down almost 14% since its 52-week high in April. 

Action At Bioquell

The sale of Bioquell’s testing unit TRaC Global for £44.5m earlier this year “represented a substantial premium to the then market capitalisation of the whole of Bioquell,” the group said on Monday, adding that the disposal unlocked substantial value for shareholders and also significantly simplified its corporate structure. 

Bioquell’s current market cap stands at £58m, which almost doubles the value of its revenues, yielding a forward net earnings multiple of 17x — based on the assumption that Bioquell would return to the black this year after small losses were reported in 2014. Trading multiples tell only one part of the story at Bioquell, of course.

Downside Vs Upside

Given the simplified structure, “increasing investor interest in the bio-pharmaceutical sector” and “heightened concerns of governments” around the world “in relation to antibiotic resistance“, the board of Bioquell has decided to carry out a strategic review of the group’s remaining biological contamination control business (60% of the group’s revenues) that may or may not lead to a combination with a larger partner. 

“If the conclusion of the strategic review is to remain an independent business, the board’s intention is still to return a majority of the proceeds from the disposal of TRaC to Bioquell shareholders,” the group also added. Based on this information, upside appears to be very limited at 147p a share — where Bioquell currently trades. 

If I chose against investing in Bioquell, then, would I be wise to make a move for Glaxo instead? 

Glaxo: Lots Of Talk, Little Action 

As you might know, there are two big problems with Glaxo: firstly, its management team hasn’t lived up to expectations in recent times, I’d argue. Secondly, there has not been any meaningful update on its break-up, rumours of which have made the rounds for months and have been fuelled by bankers close to Glaxo and Glaxo managers themselves.

Still, I do not dislike Glaxo at 1,425p a share, where it currently trades. 

The stock offers little growth but a decent yield, given that Glaxo is expected to grow revenues and core profits just above inflation for a few years from now — yet its appealing forward yield above 5% could make up for little capital appreciation.  

So, one key question is just how safe is the dividend of an investment that looks a lot like a fully priced bond.

Glaxo’s financials are sound, its balance sheet and income statement show, but the cash flow statements point to the possibility that Glaxo may need to raise more debt to finance its dividend if projections for 2015 earnings aren’t met. 

The post As Bioquell plc Surges, Should You Dump It To Invest In GlaxoSmithKline plc? appeared first on The Twelfth Magpie.

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

The deal appears to be a good one for investors in Bioquell, since it works out at 105p per share. And, when you consider that Bioquell trades at a share price of 110p even after the announcement of the deal, it is clear that it remains a relatively appealing investment at the present time. In fact, that’s even more so since it will now be a simpler business, which should allow it to direct resources to what it feels will be a more rewarding space.

Looking Ahead

Of course, Bioquell was a relatively appealing business before today’s announcement. That’s because it has an excellent track record of profitability, with its bottom line having been in the black in each of the last four years and, looking ahead, it has a very bright future. For example, Bioquell is expected to deliver earnings growth of 45% in the current year, followed by 25% in 2016.

Despite this, Bioquell continues to trade on a very low rating with, for example, it having a price to earnings (P/E) ratio of just 16.2. This equates to a price to earnings growth (PEG) ratio of just 0.5, which indicates that Bioquell’s share price could have much further to go over the medium to long term.

Sector Peers

Of course, there are a number of other health care stocks that also offer excellent future potential. For example, Shire (LSE: SHP) (NASDAQOTH: SHPG.US) is forecast to double its sales by 2020 which, if met, would be a truly stunning result at a time when many of its pharmaceutical peers are struggling to even tread water. And, with Shire trading on a PEG ratio of 1.1, it still seems to offer excellent value for money.

Meanwhile, BTG (LSE: BTG) also offers excellent growth potential at a very enticing price. Its bottom line is forecast to rise by 27% next year and by a further 51% in the following year which, when combined with a P/E ratio of 36.6, equates to a PEG ratio of only 0.5. As such, it appears to be worth buying at the present time – even though its shares have already risen by 37% in the last year.

Vast Opportunity

So, with Bioquell, Shire and BTG all having excellent growth potential, they appear to be well worth buying at the present time. Certainly, they may be more volatile than many of their UK-listed peers but, for long term investors, they could prove to be very rewarding investments.

The post Is Bioquell plc The Perfect Partner For Shire PLC And BTG plc In Your Portfolio? appeared first on The Twelfth Magpie.

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