With that in mind, here’s a look at two FTSE 100-beating high-growth smaller companies that I believe offer compelling investment potential.

dotDigital

dotDigital (LSE: DOTD) is a technology company that specialises in email marketing. Its key product dotDigital Engagement Cloud (previously known as Dotmailer) is an advanced email marketing platform that enables companies to create, test, and send data-driven automated email campaigns, and provides access to rich insights in real time. Designed to ‘empower’ marketers, Engagement Cloud is already used by over 4,000 brands worldwide, including names such as Barbour, Virgin Active, and T.M. Lewin.

Dotdigital has grown significantly in recent years and half-year results released this morning show that the group is still growing at an impressive rate. For example, for the six months to 31 December, group revenue grew 33% (organic revenue was up 15%) and group adjusted EBITDA surged 25%. Furthermore, the group’s cash balance at the end of the period climbed nearly 60% and a dividend hike of a healthy 16% was declared.

After a strong run between 2015 and 2018 where the share price surged around 230% (smashing the FTSE 100), the stock has consolidated its gains over the last 12 months. As such, I believe now could be a good time to get in, before it has another upward run. It’s up 5% today so could this be the beginning of the next leg up? The stock’s forward-looking P/E ratio of 24.2 seems fair to my mind, given the company’s growth.

Alpha FX

Another small-cap that I like right now is Alpha FX (LSE: AFX), a little-known company that specialises in FX hedging services for small and medium-sized corporate clients. Its customers currently include well-known names such as ASOS, Halfords, and Jamie Oliver yet according to Alpha, it has only penetrated a tiny proportion of its addressable market, meaning that there could be plenty of growth to come.

Like DOTD, this is a company that is growing quickly. For example, in its interim report in September, the group reported revenue growth of an impressive 55%, as well as underlying operating profit growth of 29%. Furthermore, in an update on 3 January, the group advised that recent trading has been strong and that it expects earnings for the full year to be above market expectations. What’s also impressive about AFX is that operating margins and return on equity are high, which indicate it’s a highly profitable company.

Analysts currently expect the group to generate earnings of 25.2p per share this year, which puts the stock on a forward P/E of 26.2. I think that’s a reasonable price to pay for this high-growth niche company. If the business can keep on-boarding new customers, I believe there is potential for significant upside here.

The post Two FTSE 100-beating growth stocks that I believe could double your money appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in dotDigital Group and Alpha FX. The Motley Fool UK has recommended dotDigital Group. 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.

Today, I’m profiling two smaller companies with strong growth potential that I believe could be of interest to long-term investors.

AdEPT Technology

£94m market cap AdEPT Technology Group (LSE: ADT) is a leading independent provider of managed services for IT, unified communications (linking devices), connectivity and voice solutions. Its tailored services are used by thousands of customers across the UK, including the NHS. The stock has performed exceptionally well recently, rising 24% over one year and 190% over five, yet I think there could be more gains to come in the medium-to-long term.

AdEPT has enjoyed robust growth over the last five years (revenue CAGR 17.2%) and half-year results released today show that the company continues to have momentum. Indeed, for the six months to the end of September, total revenue increased 9.5% to £24.4m, adjusted earnings per share rose 11.7% to 14.5p, and the group increased its dividend by a healthy 15.3% to 4.9p per share. While these results perhaps aren’t as strong as some were hoping for (the shares are down 5% today), I think the numbers are solid in the current environment, as business spending is down due to Brexit uncertainty.

Looking at its metrics, there’s a lot I like about the stock. Return on equity is solid, averaging 23.5% over the last three years and dividend growth has been impressive, with the payout growing nearly 500% in just five years. The valuation looks attractive too, as the forward P/E is 12.7 and the P/E-to-growth ratio (PEG) ratio is just 0.64, which is very low. My only concern is debt, which is a tad high, and has increased in the recent half year. That’s something to keep an eye on. Overall however, I see considerable potential here.

dotDigital

Another small-cap that I like right now is dotDigital Group (LSE: DOTD). Its shares are up around 285% over the last five years.

Its key product is its email marketing platform ‘dotmailer’ – an advanced platform that enables companies to create, test and send data-driven automated email campaigns, and provides access to rich insights in real time. It’s worth noting that despite the rise of social media advertising in recent years, email remains a very popular marketing channel for businesses today, as it delivers a return of £39 for every £1 spent, according to the company.

Growth here remains strong, and in its most recent full-year results released in mid-October, the group reported revenue growth of 35% and adjusted basic earnings per share growth of 28%. Yet the shares have had a choppy year, due to concerns over GDPR earlier in the year and the recent small-cap/technology sell-off, and they can currently be picked up for 15% less than the price at the start of the year, on a forward P/E of 22.8. I think that’s a very reasonable price to pay for a slice of this high-growth business. As such, I rate the stock as a ‘buy’. 

The post Two FTSE 100-beating small-cap stocks I’d buy and hold for 10 years appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in dotDigital Group. The Motley Fool UK has recommended dotDigital Group. 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.

Today I’m looking at two companies that have delivered three-year gains of 170% and 330% respectively for investors. Are you seeing these kinds of gains in your portfolio?

dotDigital

DotDigital (LSE: DOTD) is a company I have owned for several years now. I bought the shares back in 2013 for around 24p, and today they change hands for 95p, so I’ve made quite a decent profit. However, I won’t be selling just yet, as I believe there could be more gains to come in the medium-to-long term.

Founded in 1999, dotDigital is a leading provider of tools for digital marketing professionals. Its core product ‘dotmailer’ is a handy piece of software that enables clients to effortlessly construct marketing emails. It’s used by thousands of businesses, including Barbour, Screwfix and Crystal Palace Football Club.

While DOTD has experienced powerful growth in recent years, investors have been concerned this year that new General Data and Protection Regulation (GDPR) would derail the group’s growth. As a result, the shares have spent much of 2018 in a short-term downtrend.

However, it looks like these fears were overdone, as the company advised in a trading update last week that revenues for the year ended 30 June had grown approximately 35% to £43.1m with recurring revenue surging 41%, and that customer numbers had grown by 26% over the year. It also said that it had seen “no material impact” on either email volumes or recurring revenues from existing clients, following GDPR implementation. The shares have jumped 30% in less than a week after the update, putting an abrupt end to the downtrend.

Looking at these results, it’s clear that Dotdigital still has considerable momentum, and trading on a forward P/E ratio of 24, I think they still offer plenty of value. I’ll be holding on for higher profits.

Learning Technologies

Another small-cap technology stock that I have my eye on is Learning Technologies (LSE: LTG), which specialises in providing technology-driven workplace learning solutions.

With a client base that is becoming increasingly populated with national governments and blue-chip firms, the group has delivered some pretty impressive growth in recent years, with sales rising from £15m to £52m over the last three years alone. And City analysts expect this powerful growth to continue in the near term with sales of £101m anticipated this year, after the group recently completed the “transformational” acquisition of PeopleFluent Holdings, a leading provider of cloud-based integrated recruiting, talent management and compensation management solutions.

A trading update released this morning has confirmed that the firm’s financial performance for the six months to 30 June 2018 is “in line” with market expectations. Management advised that revenues for the period are expected to be at least £27.3m (excluding the recent acquisition of PeopleFluent), a rise of 27% on last year, with organic revenue on a constant currency, like-for-like basis increasing approximately 10%.

I like the long-term story here. However, the shares do look a little pricey at present, trading on a forward P/E of 44. As such, I’ll be keeping the stock on my watchlist for now.

The post Two small-cap growth stocks that could help you quit your job appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in dotDigital Group. The Motley Fool UK has recommended dotDigital Group. 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.

I doubt many regulars are likely to notice, but that cheaper fizz prosecco is also going, along with a load of other EU-produced booze. British wheat beer and alcohol-free beer are set to replace current German products, all as part of Mr Martin’s plans to rid the pubs of nasty EU wares.

To be honest, it all seems a bit silly to me. And while prosecco and weissbier are popular products by those names, I can’t see it being a particularly good move — for my money, a business should sell its customers what they want rather than trying to dictate their tastes.

Still, there should at least be some PR from it, and I doubt it will harm what looks to me like an attractive investment in the long term.

Beating the odds

While the pubs sector has been struggling and competitors have been selling off pubs and seeing earnings falling, JD Wetherspoon has been enjoying steadily-rising earnings. EPS climbed from 46.2p in 2013 to 70.8p last year, and though there’s a dip forecast for this year, analysts expect 75.6p by 2020.

We look set for a few years of slower expansion as the company concentrates on buying freeholds and refurbishing existing sites — and judging by a couple of outlets near me, the latter is very welcome. This retrenchment phase might explain why the dividend hasn’t been lifted for years and is now covered nearly six times by earnings, and it is causing debt to rise.

I’m a little concerned with P/E multiples of 16-18, but I think I’m seeing the makings of a long-term dividend cash cow here, even if yields are currently only around 1%.

Software growth

When I looked at full-year results from dotDigital Group (LSE: DOTD) in February, I liked what I saw. The company provides software for the digital marketing business, and you don’t need me to tell you how important that is these days. And it counts technology giant Microsoft among its customers.

The company came to my attention again recently when it popped up in my growth share screen, which looks for stocks with attractive growth characteristics and not troubled by debt.

We’ve seen earnings per share more than double between 2013 and 2017, and analysts are predicting 25% growth this year followed by 29% next. That hasn’t gone unnoticed, and the share price has soared by 370% over the past five years to reach 70p (while the FTSE 100 has gained just 26%).

Off the boil?

But the shares have been considerably higher, peaking at 105p in December. I can’t help thinking we’re looking at a typical growth share phase here, with investors following each other in the upwards climb which results in a stretched growth valuation. And a few canny shareholders cashing in some profits can trigger a needed correction.

We’re looking at a PEG multiple of one for this year, which isn’t a screaming growth indicator — though it doesn’t, to my mind, shout overvaluation. And if forecasts prove accurate, 2019 would see a P/E of around 18.5 and a low PEG of 0.6. Both of those look to me like strong indicators, and coupled with those recent results, I like the look of dotDigital shares.

The post 2 super growth stocks I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended dotDigital Group. 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.

Today I’m looking at two specialist software groups that have become very successful. I believe that both have the potential to deliver big gains for investors.

Keeping track of the cash

Running a big business is as much about financial management as operational execution. Successful companies usually have good financial controls.

Microgen (LSE: MCGN) is one of the world’s leading providers of the software used by chief financial officers for financial analytics, compliance and reporting. The group also provides systems used by wealth management firms to administer funds and trusts.

Although this isn’t a start-up, it’s still growing fast. Organic sales rose by 37% last year, while total revenue was boosted by acquisitions and rose by 46% to £62.6m.

Looking at the bottom line, I can see that operating profit rose by 35% to £11.1m, giving a healthy operating margin of 17.6%. Earnings rose by 55% to 16.4p per share and shareholders will enjoy a total dividend of 6.25p per share, an increase of 25% from 2016.

Can this stock keep rising?

Today’s strong results were broadly in-line with expectations and the shares only rose by 2% in early trade. The good news is that recent strong momentum is expected to continue.

Analysts have pencilled in earnings per share growth of 20% for 2018 and a 17% hike to the dividend. This leaves the stock trading on a 2018 forecast P/E of 27, with a prospective yield of 1.4%. That’s not cheap, but in my view this is a quality business in a growing market. I believe these shares could still be a profitable long-term buy.

Enterprise-grade marketing

Microgen’s customers are generally quite sticky, as a lot of work can be required to move to a rival. That’s also true of my next stock, online marketing specialist dotDigital Group (LSE: DOTD).

This firm produces dotmailer, an enterprise grade online marketing system that’s built around email marketing.  This may seem old fashioned, but it’s still surprisingly profitable. Last year, this £250m company generated an operating margin of 25% on sales of £32m.

Partners with whom dotDigital integrates include Shopify, Magento and Salesforce.

The firm released its half-year results last week, triggering a slide that’s seen the shares fall by 14% in eight days. Is this a buying opportunity, or a sign that growth might be slowing?

I might buy

Sales rose by 25% to £18.8m during the six months to 31 December, while gross profit rose by 20% to £15.6m during the period. However, operating profit only rose by 1.8% to £4.4m.

The difference in growth rates between these two measures of profit was due to a big increase in administrative expenses, which rose by 26% to £11.1m.

Will this extra spending drive future profit growth, or is it a sign of bloat? I’d need to do more research to be sure, but it’s worth remembering that dotDigital has delivered average sales and earnings growth of more than 20% per year since 2012. This is a company that’s delivered on its promises.

Although the shares trade on a forecast P/E of 28, I’d continue to hold and might buy if they dip below 80p.

The post 2 growth stocks that could double your money appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended dotDigital Group. 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.

Revenue in the six months to 31 December grew by 25% to £18.8m, with adjusted EBITDA up 8% to £5.7m. The acquisition of Comapi in November caused a cash outflow of £10.7m, but that still left the company with cash of £10.5m at the halfway stage.

Software can be a fickle business. But dotDigital’s approach is to provide software as a service, expand its offering (the Comapi acquisition apparently “provides further progress towards fully-fledged omnichannel offering“), and build long-term customer relationships.

That should hopefully provide both stability and a grounding for long-term growth, as CEO Milan Pate said the firm has “further cemented our partnerships with Magento, Shopify, Microsoft and our other partners.“

Cash prospects

That strategy leads to recurring revenue streams and strong cash generation, and I think we could be looking at one of tomorrow’s big cash cows here. Dividends are currently only yielding under 1%, but that’s covered more than four times by earnings, and it’s progressive. From 0.1p per share in 2013, a dividend of 0.68p is forecast for the current year.

It does lead to my one caution that’s common with growth stocks. When a company starts to reach maturity and the transition from an all-out growth story to the beginnings of an income investment, the growth investors often dump it and the share price takes a knock.

But I like the long-term look of dotDigital, and I don’t see a 2019 P/E of 24 as too demanding.

Bigger risk

An example of a ‘jam tomorrow’ lossmaker that I’d steer clear of right now is Verona Pharma (LSE: VRP), but I want to start by telling you what I like about it.

Verona focuses on “developing and commercialising innovative therapies for respiratory diseases,” and 2017 results looked promising — for a start-up still in its cash-burn phase, at least.

Clinical studies sound impressive, with two having recently completed ahead of schedule. The firm’s RPL554 treatment for COPD, when used alongside Tiotropium, gave positive results including “significant and clinically meaningful additional improvement in peak lung function” and faster onset of action. It was well tolerated too, which is a key achievement.

Verona also raised £70m in the period, from a combination of a successful IPO on the Nasdaq Global Market, together with a European private placement and a shareholder private placement. That, especially the Nasdaq launch, suggests that some serious investors see great promise here.

Risky finances

I was bullish a year ago, but finances put me off now. A reported operating loss of £29.8m was due to the costs of these clinical trials and to pre-clinical activities, and the firm did end the year with £80.3m in cash and equivalents on the books.

But net cash used in operating activities ramped up to £20.7m (from £5.6m), and there are pre-tax losses of more than £30m per year currently forecast for the next two years.

That increases the likelihood of further cash being needed before profits come around, and with the pitfalls that can beset the pharma business right up until the last minute, the risk is too great for me.

The post A small-cap growth stock I’d buy with £1,000 today, and one I’d sell appeared first on The Twelfth Magpie.

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• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Alan Oscroft has no position in any of the shares mentioned. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. The Motley Fool UK owns shares of and has recommended Shopify. The Motley Fool UK has recommended dotDigital Group. 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.

And even though the company’s stock has risen more than 75% over the past year, I think more astounding growth could be on the way as the group sets its sights on the massive European market. Its latest two acquisitions there total €274.1m and not only broaden the group’s exposure to new regions, but also marked its first foray into ceramic flooring, a huge market in its own right.

Even before these two high-margin acquisitions, revenue has been growing quickly with sales up a whopping 24% year-on-year in the half year to September. Much of this growth came from acquisitions but I estimate organic growth of around 4% was recorded in the period, which is very, very good.

With growth accelerating and a stellar history of consistently improving margins and cash flow across the business, I think Victoria is setting itself up for another great year.

You’ve got mail 

Also on my list is digital marketing software provider dotDigital (LSE: DOTD). The company’s share price has leapt by 50% in the past year as its dotmailer e-mail and multi-channel marketing tool has caught on with clients looking for effective, easy-to-use automated methods to stay in contact with prospective and current customers.

With a highly effective, but low-cost, core product, dotDigital has had few problems finding clients ranging from small businesses to FTSE 350 firms. In the half year to December, revenue was up 25% to £18.8m due to a small bolt-on acquisition and impressive organic expansion of 17%.

And unlike many small firms that are growing rapidly but lose loads of money, dotDigital is profitable and has a large cash position. This is in large part due to the fact that over 80% of its revenue is highly profitable recurring sales from existing clients. In 2017 this led to EBITDA margins hitting 31.5% and net cash rising to £20.4m, although a recent £11m acquisition will dent this figure.

With a great product in a fast growing market, cash on hand and proven profitability, I think dotDigital is attractively priced even at 30 times full year 2018 earnings.

To infinity and beyond 

A more out-of-this world option I’ve got my eye on is Gooch & Housego (LSE: GHH), which is an expert in designing high-quality optical components for end markets ranging from space agencies to health imaging and a wide variety of industrial applications.

In the year to September the group’s revenue jumped 18.7% on a constant currency basis to £112m due to organic growth and a small acquisition. This growth was driven by particularly strong demand and management is investing heavily in both R&D and acquisitions to support what are expected to be years of strong growth.

And in the meantime the business is still strongly profitable with adjusted pre-tax profits hitting £16.1m last year and its net cash position rising to £14.9m at year-end. While Gooch & Hosuego isn’t cheap at 26 times forward earnings, the group’s strong competitive position and high growth prospects make it very attractive to me.

The post 3 promising stocks I’d buy in 2018 appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended dotDigital Group and Gooch & Housego. 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.

Operational momentum

The company’s business of providing managed services to digital marketing professionals through its dotmailer email marketing automation platform has produced some impressive figures. Revenue is 19% higher than a year ago, earnings per share elevated 32% and the firm’s net cash position increased by 18% to a little over £20m. I always find it comforting when a company has no borrowings on its balance sheet, as is the case here. The directors indicated their optimism for the future by pushing up the dividend by almost 28%.

Operational momentum is pacey, and key performance indicators include average revenue per user lifting 24% to £715 and overall volume of messages sent increasing by 38% to £11.9bn. More than 550 new clients signed up to Dotdigital’s service during the period, including well-known names such as BetFred, CNBC, Fannie May, Jack Wills, Superdry and The Premier League.

International expansion

The company has its sights set on international expansion and grew its revenue outside the UK by 48% during the year, which strikes me as a stunning rate of growth. If the firm can sustain that kind of performance, the growth outlook is exciting. Chief executive Milan Patel seems confident and said in the report: “The market outlook remains strong which puts us in a good position to capitalise on our strategy and the Board remains confident about achieving our ambitious growth plans.”

At today’s share price, around 78.5p, the forward price-to-earnings (P/E) rating runs close to 29 for the year to June 2018, which isn’t cheap, but could end up being reasonable for a firm with such robust growth prospects. I’d rather take my chances with a growing business such as Dotdigital’s than on fallen support services company Interserve (LSE: IRV), which is starting to look insecure.

Discussions with lenders

According to news reports on Monday, Interserve revealed that it is “engaged in constructive and ongoing discussions with its lenders,” which is enough to send me scurrying to the hills. The firm’s share price plummeted in September after it warned that profits would be “significantly below” previous expectations following grim trading in July and August. The firm is engaged in extracting itself from its energy-from-waste contracts but now thinks the final costs of that tactic will be much higher than the £160m expected initially.

Interserve has proved the weaknesses of its business model. Multi-discipline contracting and outsourcing is a tough way to earn a living. Meanwhile, Dotdigital’s software operation is growing earnings fast, so the choice between the two operations is stark, and I’d rather go with the winning team. 

The post A hot growth stock I’d buy right now over Interserve plc appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

FDM Group

FDM Group (LSE: FDM) is a UK-based professional services firm that provides IT consultants to its clients, assisting with activities such as business analysis, data and operations services and cyber security. With ops in the UK, North America, Europe and Asia Pacific (APAC), and 50% of sales coming from outside the UK, the company is well-diversified geographically.

The technology landscape is changing at a rapid rate and as a result, FDM Group has enjoyed strong demand for its services in recent years. Indeed, revenue has surged from £97m five years ago to £189m last year, and earnings per share have tripled in that time, from 8p to 24p per share. The group released half-year numbers this morning, and the momentum shows no sign of slowing down.

Revenue jumped 35.4% to £117.1m, and profit before tax rose an impressive 32.9% to £20.6m. Cash flow generated from operations increased 27.4% to £20m and the company generated adjusted basic earnings per share of 15.5p, up 34.8%. Growth across the North America and APAC divisions was particularly strong, with revenue in these regions rising 56% and 137% respectively. Chief Executive Rod Flavell stated that the board anticipates the group’s performance for the full year will be “comfortably ahead of its previous expectations.”

After a 44% share price gain over the last year and a 10% spike today, FDM now trades on a forward P/E ratio of 31, meaning that the stock isn’t cheap. Having said that, there’s a lot to like about the business. Demand for its services should remain strong in coming years, cash flow is healthy, and the company even pays a dividend of around 2.5%. Furthermore, the stock recently entered the FTSE 250, which should increase institutional interest. With that in mind, I’m going to keep a close eye on FDM Group shares in the hope that a pull-back creates a more attractive entry point.

dotDigital Group

Another strong performer in the tech space in recent years has been dotDigital Group (LSE: DOTD), a company that specialises in email marketing.

I’ve owned shares in the £208m cap minnow for a few years now, and have been consistently impressed at the growth the company has generated in this time. For example, in the last three years alone, revenue has more than doubled and net profit has rocketed from £0.7m to £6m.

The company released a trading statement on July 18, and the numbers looked good, with overall revenues increasing by 19% to £32m and average revenue per client increasing 24% to £715 per month. The company recorded growth in revenue outside the UK of 48% and had a strong cash balance of £20.4m at June 30.

On a forward P/E ratio of 31, this is another stock that isn’t particularly cheap however, if the company can continue to grow at the current rate, I see no reason why the shares can’t continue to rise in the medium-to-long term.

The post Could these rising tech stocks help you retire early? appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in dotDigital Group. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Amazon, and Facebook. 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.

But that’s not to say there aren’t stocks out there that can accomplish this feat. There are plenty of companies that have racked up impressive growth rates year after year, and if a company has shown that it can meet lofty growth targets in the past, it’s more likely to repeat this performance in the future.

Two top picks 

Dotdigital (LSE: DOTD) and Cohort (LSE: CHRT) are two such companies. Both are small-caps, and both have chalked up highly impressive growth rates over the past five years.

City analysts expect Dotdigital’s growth streak to continue for the next few years. For the company’s financial year ending 30 June 2017, analysts have pencilled-in earnings per share of 2.3p and a pre-tax profit of £7.9m. For the year ending 30 June 2016, the company reported earnings per share of 1.8p. 

If the company hits City growth targets this year, earnings per share will be up 27% year-on-year. 

Dotdigial is no stranger to such explosive growth. Between 2012 and 2016 the company’s earnings per share doubled, with growth during this period averaging 20% per annum. If the firm meets expectations for this year, earnings per share will have grown 155% in six years while pre-tax profit will have grown 220% over the same period. 

Unfortunately, with such an impressive record of growth behind the company, shares in Dotdigital aren’t cheap. The shares currently trade at a forward P/E of 23.4 and support a dividend yield of 1%. Nonetheless, if the company continues to grow earnings per share at an average rate of 20% per annum, this high valuation is easily justifiable.

Future dividend champion?

Shares in Cohort trade at a forward P/E of 15.8, which looks cheap compared to Dotdigital’s high multiple. The shares are cheap for a reason as the City expects the company’s earnings per share to fall by 7% for the year ending 30 April 2017. However, earnings per share growth of 15% is expected for the year after, and if the company meets this target, Cohort will have grown earnings per share by 100% in seven years. Over the same period, pre-tax profit has more than doubled. 

Barring this year’s slip up, Cohort’s growth over the years has been nothing short of impressive and if past trends continue, there’s no reason why the firm’s earnings per share can’t double again in the next six years. If Cohort’s earnings per share do double again, and the shares continue to trade at 15.8 times forward earnings, the stock could hit 948p by 2022, 137% above current levels. 

If growth slows, management has plenty of room to turn the company into an income stock as the current dividend payout of 7p per share is currently covered three-and-a-half times by earnings per share. 

The post Can you afford to ignore these two small-cap growth stocks? appeared first on The Twelfth Magpie.

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