The first of these is data analytics software group Oxford Metrics (LSE: OMG). The firm’s shares rose by 7% on Thursday, after it announced that adjusted pre-tax profit for the year ended 30 September is expected to be “slightly ahead of market expectations”.

Broker forecasts previously were for earnings of 2.3p per share for the year. In my view, the wording of Thursday’s update suggests that the final figure could be 5%-10% higher than this — perhaps 2.4p-2.5p.

That would still leave the shares looking fairly pricey, on around 25 times forecast earnings. But the company is expected to deliver substantial further gains in 2018. Recent forecasts suggest that earnings per share could rise by as much as 50% to 3.5p next year. That would give the shares a more reasonable P/E of 18.

Just another expensive tech stock?

Valuations for some tech stocks have become pretty steep in recent months. But in my view, Oxford Metrics’ fundamental quality suggests its valuation might be justified.

The first point to note is that it’s highly profitable and generates plenty of cash. The group’s operating margin was 18% last year, while return on capital employed (ROCE) — a key measure of profitability — was about 16%. Both figures are well above average.

Today’s trading update also suggests that Oxford Metrics has continued to generate strong free cash flow this year. Net cash for the year just ended was £9.8m, up from £8.3m the previous year.

High profitability and strong cash generation provide good support for the group’s dividend. This payout has grown by an average of 27% since 2011, and now offers a forecast yield of 1.7%. I plan to continue holding my shares following today’s gains.

A high-yield alternative

If you’re looking for small-cap stocks with a high dividend yield, you might want to consider spread-betting and stockbroking firm CMC Markets (LSE: CMCX). Its shares halved in value last year, when the FSA announced plans to limit the amount of leverage that could be offered to retail customers.

We don’t yet know what form these new rules will take. But in its latest trading statement, CMC emphasised its focus “high-value, experienced clients”, whose activity may be less affected by any changes to the rules. The group is also continuing its expansion into stockbroking through a partnership with one of Australia’s largest banks.

According to a recent trading statement, half-year profits are expected to be “significantly higher” than for the same period last year. The market has certainly regained its confidence in the business, as the shares have now risen by more than 50% from last year’s lows.

Is this view correct? It’s too soon to say. In the firm’s H1 trading statement, management warned that it “remains cautious about the future outlook given the ongoing regulatory uncertainty”.

However, the shares now trade on a 2017/18 forecast P/E of 12.5, with a prospective yield of 4.5%. In my view this is probably cheap enough to discount the risk from regulatory changes. I’d continue to hold.

The post 2 small-cap dividend stocks that could be millionaire-makers appeared first on The Twelfth Magpie.

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Roland Head owns shares of Oxford Metrics. 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.

IT infrastructure products and services specialist Softcat (LSE: SCT) has released an upbeat set of results for the year to 31 July. They show that the company is making good progress with its strategy. Evidence of this can be seen in its rise in revenue of 12.8% and increase in adjusted operating profit of 15.2% versus the previous year.

These figures were achieved against a backdrop of modest growth in the UK economy. This has been reflected in slow growth in the IT market, which shows that Softcat is a relatively resilient stock during difficult periods. It has been able to deliver impressive new contract wins and to increase the amount spent by existing customers. It has achieved this through a focus on customer service, which has helped to differentiate it from sector peers.

However, Softcat’s outlook is somewhat disappointing. In the current financial year it’s forecast to record a rise in earnings of just 1%. This could prove to be a temporary blip and a return to higher levels of growth may take place in future years. However, with the company’s shares trading on a price-to-earnings (P/E) ratio of 15.4, they seem to lack appeal given that near-term outlook. As such, it may be worth waiting for an improved profit performance before buying-in.

OMG!

Also reporting today within the tech sector was Oxford Metrics (LSE: OMG). It provides products and services for the life sciences, entertainment and other sectors. Its trading in the final part of the financial year has been strong. This means that revenues in excess of £29m will be reported, which is ahead of last year’s figure of £25.8m and is also ahead of market expectations.

OMG’s pre-tax profit will be in line with expectations. Its Vicon business has performed well in all geographies due to recently refreshed products. It has also benefitted from weaker sterling versus the US dollar. Similarly, OMG’s Yotta has continued to benefit from a strengthened recurring software revenue stream in the UK and in international markets. However, the firm has decided to discontinue OMG Life in order to focus on Vicon and Yotta.

Looking ahead, it’s forecast to record a rise in earnings of 20% in the current financial year. This puts it on a PEG ratio of only 0.7, which indicates that it offers excellent value for money. Furthermore, its strategy to focus on Vicon and Yotta should allow it to develop faster growth and more efficiencies over the medium term.

While it still has a long way to go to reach ARM’s size and status, OMG seems to be a worthy buy for tech-focused long-term investors.

The post Is this tech stock set to be the next ARM Holdings? appeared first on The Twelfth Magpie.

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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.

For some investors, however, AIM has been nothing more than a graveyard for their hard-earned cash. Indeed, it is true that almost 75% of the stocks that have listed in this market have actually lost investors either some, or all of their money.

As an investor myself, I can say that I have been there, done that, and indeed got the T-shirt – anyone remember Pursuit Dynamics? How clever I thought I was looking at my 250% paper gain, only to see that evaporate to an almost total loss as the company’s fortunes soured, taking the story with it.

That said, AIM should not be considered a no-go zone – investors just need to know where to look. Just look at the 10-year chart below, which shows investors just how well we can do when we invest in the right type of stock.

Hopefully, you can now see the attraction — so let’s take a look at three stocks that I think you can hold for the next 20 years and still turn a profit…

Making A Clean Getaway….

The first company I’m looking at today is Tristel (LSE: TSTL). For those of you not familiar with this business, it is based in the UK and engaged in manufacturing of infection control, contamination control and hygiene products. The company operates in three segments: Human healthcare, Contamination and Animal healthcare. These products are based around the company’s proprietary chlorine dioxide chemistry.

Management has been steadily growing the business as it moved away from the declining legacy products. This has resulted in the company swinging back into profit in 2014. Accompanying the results, management sounded very confident for the prospects of the business going forward — this optimism proved correct as the company guided the market higher with a positive-sounding trading update on 21 May this year. Following this, on 18 June the company announced a special dividend of three pence per share to be paid on 6 August as there was no need for the extra cash, even after the considerable investment going into new markets and in its products.

As one would expect, the shares have re-rated, currently changing hands at over 20 times forward earnings. But with earnings growth expected to be at least 40% ahead of last year, this leaves the PEG (price to earnings growth) at less than one, leading me to believe that the shares could well re-rate higher still.

Picture Perfect?

Next up is OMG (LSE: OMG), also known as Oxford Metrics Group. This company is engaged in the development, production and sale of image understanding solutions. It operates in three business segments: Vicon Group, which is engaged in the development, production and sale of computer software and equipment for the engineering, entertainment and life science markets; Yotta Group, which is engaged in providing services for the management of infrastructure and taxation, highway surveying and associated software development; and OMG Life: this segment’s engaged in product development, and is currently loss-making.

What brought this company to my attention was the sale of the 2d3 business on 10 April 2015 to Insitu, a subsidiary of Boeing for $25 million, resulting in net proceeds of £11.3 million. Since this transaction, shareholders have received 4.5 pence per share as a special dividend on 15 May, and can expect a further 5 pence per share dividend on 10 July 2015.

Going forward, management has reduced the cost base of OMG Life, which was obscuring the profitability of the company as a whole. Both Vicon and Yotta have secured new business, enabling management to expect results to be in line with market expectations. The shares aren’t cheap at around 18 times forecast earnings, but they are supported by £8.6 million in cash (not including the post-period cash in and out flow) and, if OMG Life can start to deliver, the shares may go higher from here.

Bang On Trend?

Finishing on one of the stars of AIM, let’s look at ASOS (LSE: ASC). Capitalised at over £3 billion, this company would be part of the FTSE 250 if it were to list on the main market.

As the chart above shows, if you have held onto your shares in this business for the last 10 years, you could well be seriously rich… but what does the future hold for this growth star?

On the positive side, it was nice to see that ASOS’s zonal pricing rollout appears to be working out according to plan. Additionally, this appears to have allowed management to guide the market “in-line” (with expectations), something shareholders will be thankful for after last year’s guidance revisions.

On the negative side — and something that I’m watching — is the operating margin, which currently stands at 4.27%. Compare that to Boohoo (LSE: BOO), also an online retailer, at 7.56%

Whilst I would concede that ASOS is investing in its business for the long term, and this will put pressure on its margins in the short term, I am also mindful that the shares trade on a forward PE of over 73 times forecast earnings. Should we see the missteps of last year, I don’t think that Mr Market will be too forgiving…

The post 3 AIM Stocks For The Next 20 Years: ASOS plc, Tristel plc & OMG plc appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• 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?

Dave Sullivan owns shares in Tristel and OMG. The Motley Fool UK owns shares of ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.