Another extraordinary marketing firm, Next Fifteen Communications (LSE: NFC), has an equally impressive customer base including Alphabet, Apple and Microsoft.

Many investors believe these two companies could grow alongside their clients, but is BrainJuicer the better buy after today’s positive update, or does Next Fifteen’s consistent track record give it the edge?

BrainJuicer doesn’t believe in persuading customers using facts and figures. Humans tend to make snap decisions and consider only the top three or four brands when buying low-ticket items like ice creams.

Therefore, rather than focusing on the logical qualities of a product BrainJuicer bases its campaigns around “Fame, Feeling and Fluency.”

This novel approach drove an incredible 30% compound annual revenue growth rate between 2005 and 2013, with profits following along. The company’s expansion has been more muted in recent years however, growing only 3% total since then.

Its share price is approaching all-time highs, which seems overdone considering recent lacklustre revenue growth. Management also failed to quantify the outperformance, therefore lowering its value.

Today’s news is great for current shareholders, but a PE of 20 times might seem a little steep for those looking to buy the shares, especially if BrainJuicer can’t reignite revenue growth.

Two decades of growth

Next Fifteen Communications provides tech giants with PR, marketing and niche technical services.

The company might not have expanded as quickly as BrainJuicer, but its track record is no less impressive given its consistency. It has been profitable in all but two of the last 20 years and has grown revenue from £7.9m to £129.8m, or a CAGR of 6.9% in the same period.

A slew of acquisitions has turned it into a full-service provider over the last few years, which could facilitate revenue growth for some time.

BrainJuicer’s revenue growth has slowed down a little over the last few years, but Next Fifteen’s has been picking up the pace, jumping 23% last year.

I believe Next Fifteen’s revenues could be more defensible than BrainJuicer’s too because serving companies like Apple requires a deep understanding of tech that isn’t easily replicated.

BrainJuicer or Next15?

BrainJuicer has used its pause in growth to focus on margin expansion. The company reported an impressive 19% operating margin last year, compared to Next Fifteen’s 8%. Such a high figure implies that its services are still unique, otherwise competition would likely drag down profitability towards single-digits.

Next Fifteen trades at a rich 60 times last year’s earnings, but this figure doesn’t take into account the company’s rapid expansion, or its strong cash-flow. You see, earnings have recently been hit by high amortisation costs following past acquisitions. If we ignore these non-cash charges, the company looks a little cheaper at only 23 times free cash flow generated in the last 12 months.

Interestingly, BrainJuicer trades on 22 times the same metric. 

Both these companies are worth a closer look, in my view, but I believe Next Fifteen’s recent momentum make it a more attractive proposition than BrainJuicer’s, in spite of today’s upgrade.

The post BrainJuicer Group plc beats forecasts, but is it a better buy than Next Fifteen Communications plc? appeared first on The Twelfth Magpie.

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Zach Coffell 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.

Despite this, Brainjuicer’s UK and Chinese divisions saw their gross profit fall by 2% and 5% respectively. The company says it’s too early to know what the effect of the EU referendum will be on the UK economy, but that its financial position remains strong and it should benefit from weaker sterling.

Looking ahead, Brainjuicer is forecast to increase its bottom line by 5% this year and by a further 17% next year. This could positively impact on investor sentiment and with the company having a price-to-earnings growth (PEG) ratio of just 0.7, there seems to be plenty of scope for a share price rise over the medium-to-long term.

Join the dots

Also reporting today was marketing automation software specialist Dotdigital (LSE: DOTD). Its shares have risen by 5% today as it reported a rise in sales of 26% for the full year. Furthermore, earnings before interest, tax, depreciation and amortisation (EBITDA) will be slightly ahead of market expectations, which is clearly being warmly received by the market.

Encouragingly, monthly recurring revenues from dot mailer’s SaaS-based usage were up by 31% during the period, while its creative and managed service email marketing revenue rose by around 11%. And with Dotdigital having experienced growth of 58% outside of the UK, it believes the impact of Brexit on its business won’t be material. That’s because it has a diverse spread of clients across many sectors and geographies.

With Dotdigital forecast to grow its earnings by 35% next year and its shares having a PEG ratio of 0.5, it seems to offer a wide margin of safety and excellent value for money. Therefore, its share price could continue today’s upbeat performance over the medium-to-long term.

Upbeat update

Meanwhile, shares in mineral sands company Sierra Rutile (LSE: SRX) have risen by 11% today after it released an upbeat quarterly production update. Rutile production increased by 16% during the quarter, which means that production in the first half of the year was a record 61,408 tonnes. Full-year production is now expected to be at the upper end of previously-stated guidance of between 120,000 tonnes and 135,000 tonnes.

Sierra Rutile is continuing to enjoy high demand for high-grade natural rutile, with 96% of its maximum targeted sales volume already contracted for 2016. Its ramp-up in production from the Gangama Dry Mine is also performing ahead of plan, while it’s enjoying continued strong demand from pigment and welding customers in Europe and North America. As such, its prospects appear to be bright and its shares could be set to continue their 62% gain since the start of the year.

The post Should you buy these small-caps on today’s news? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens 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.