I’ve written about Vodafone a number of times since, suggesting in May, when the shares were trading at 124p, that investors could double their money. With the shares now at 162p, and Tracsis’s at 622.5p (up 3% today, following the release of its annual results), it seems like a good time to review.

I’ll look at Tracsis first, before turning to my headline question: “Do I still think the Vodafone share price could double your money?”

Very buyable

Tracsis describes itself as “a leading provider of software, hardware, and services for the rail, traffic data, and wider transport industries.” One of the things I like about the business is that I see strong structural drivers for growth in the areas it specialises in, due to rapid urbanisation, rising demand for intelligent transport solutions, and enhanced safety.

It’s no surprise, then, that the company today reported a very healthy 24% increase in revenue to £49.2m for its financial year ended 31 July. This came from a combination of organic growth of 9% and growth from acquisitions of 15%.

Operating profit before exceptional items increased 13% to £6.7m, earnings per share (EPS) rose 7% to 28.25p, and the board lifted the massively covered dividend 13% to 1.8p. Impressively, Tracsis has no borrowings, and ended the period with a cash balance of £24.1m, up from £22.3m, despite spending £6.8m on three acquisitions during the year.

The table below puts the current valuation of the company in the context of the previous years when I covered its results:

I’ve said for the last two years the shares look very buyable to me, and I say it again this year, with the cash-adjusted price-to-earnings (P/E) ratio at 19.1.

Mixed news

Vodafone’s half-year results for the six months ended 30 September, released earlier this week, contained mixed news. The headline was a statutory loss of €1.9b. Management said this “primarily reflects losses in relation to Vodafone Idea post an adverse judgement against the industry by the Supreme Court in India.”

Whatever the outcome of the company’s active engagement with the government to “seek financial relief for Vodafone Idea” – and indeed it’s future in the country – I don’t think it’ll ultimately derail the prospects of what is an internationally diversified telecoms behemoth.

The positives in the results included organic revenue growth of 0.7% in Q2 (a strong rebound from a 0.2% decline in Q1), and an upgrading of management’s full-year guidance on earnings before interest, tax, depreciation, and amortisation (EBITDA). The company now anticipates EBITDA of €14.8b to €15.0b (previously €13.8b to €14.2b).

Plenty of upside

In contrast to Tracsis, Vodafone carries hefty net debt (€48.1b at the period end), and this year’s forecast EPS of 8.3p (giving a P/E of 19.5) only thinly covers an anticipated dividend of 7.8p (4.8% yield).

I don’t see investors doubling their money in short order from the current share price. However, with City analysts forecasting EPS growth in excess of 20% next financial year, I believe there’s still plenty of upside for the shares, and I’d be happy to buy them at today’s level.

The post Do I still think the Vodafone share price could double your money? appeared first on The Twelfth Magpie.

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• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Which will reach £2 first, Lloyds or Vodafone shares?
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Tracsis. 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.

Sticky income

The best buy-and-forget stocks are those companies that have a sticky business model and durable competitive advantage, or to put it another way, companies that have established themselves as the best operator in their sector and are difficult for customers to leave.

Accounting software provider Sage (LSE: SGE) ticks both of these boxes. Not only is this company one of the leading accounting software providers in the UK, but it is also tough to switch away from the business as doing so means transferring all historical accounting data, which as any business manager will know, is extremely time-consuming and more often than not, is not worth the effort.

However, it hasn’t been plain sailing for Sage over the past 10 years. Traditionally, the business relied on selling software to customers with a CD, but over the past decade, the world has transitioned away from CDs and DVDs towards cloud computing and streaming.

Sage was caught out by the shift and was relatively late in producing its cloud offering. Luckily, the company has now caught up.

Since 2014, revenues have jumped by 37%, and net profit has nearly doubled. Analysts are expecting more of the same over the next two years. By 2020 they expect the business’s net income will hit £364m, up from £300m in 2017, on revenues of £2.1bn. And because it is so complicated and time-consuming to move away from Sage’s software offering, I reckon the company’s earnings will continue to grow at a steady rate for the foreseeable future, which is exactly what I want to see in a buy-and-hold-forever stock.

As well as its impressive rate of growth, shares in the company also support s dividend yield of 2.4%.

Overvalued

Sage is, in my opinion, one of the most attractive software stocks you can buy right now. Unfortunately, I can’t say the same for Tracsis (LSE: TRCS).

Tracsis provides software services for the rail, traffic data and broader transport industries and it has achieved some impressive growth over the past five years.

Sales and earnings have roughly doubled since 2014 with net profit hitting £7.3m last year, from £3.3m in 2014. City analysts are expecting the company to report earnings per share growth of 55% this year to 26.8p, which puts the stock on a forward P/E of 23.3. I think this is relatively expensive compared to the firm’s growth (it trades at a PEG ratio of 2.8) and other figures tell me this business isn’t as attractive as Sage.

For example, the company isn’t as profitable. It reported an operating profit margin of 21.5% last year, compared to Sage’s 23%. At the same time, the group’s return on equity was just 19% last year, compared to Sage’s 24%.

These profitability metrics tell me Tracsis should trade at a discount to its larger peer, but the stock is trading at a slight premium, and that’s why I think Sage is the better buy.

The post Another FTSE 100 stock I’d buy and hold forever appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. he Motley Fool UK has recommended Hargreaves Lansdown. 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’ll come back to why I believe Vodafone’s current share price and 9% dividend yield are incredible value, but first I want to tell you about tech firm Tracsis (LSE: TRCS). This £170m-cap company, which released its annual results today, is a leading provider of software and services for the traffic data and transportation industry.

Growth on track

I lauded Tracsis when I covered its results this time last year. I’m happy to do so again, after what chief executive John McArthur described this morning as,“another great year for Tracsis on multiple fronts.” The company focuses on markets that generally have “high barriers to entry, with contracts that are sold on a recurring/repeat basis, and to a retained customer base that is predominantly blue-chip in nature.” The strategy continues to deliver consistent growth.

This year, group revenue increased 16% to £40m, with a strong performance from both its Rail Technology & Services division (up 19% to £19m) and Traffic & Data Services division (up 13% to £21m). Adjusted basic earnings per share (EPS) increased 9.4% to 26.34p from 24.08p last year and cash on the balance sheet (the company has no debt) swelled to £22.3m from £15.4m. A year ago, the share price was 522.5p and the trailing price-to-earnings (P/E) ratio was 21.7. However, with cash representing 55p a share, the cash-adjusted P/E was a more palatable 19.4.

Today, the share price is 590p, the trailing P/E is 22.4 and, with cash on the balance sheet now representing 79p a share, the cash-adjusted P/E is 19.4. This is the same as last year — as is my conclusion: the shares look very buyable to me.

Phoney dividend worries?

One thing investors don’t get from Tracsis is a high dividend yield. It’s just 0.3% on this year’s payout of 1.6p — although it’s rising fast (up 14% from last year) and is covered a massive 16.5 times by earnings. In contrast, Vodafone’s generous dividend has always been a big attraction, and at the current depressed share price of 147p, the yield on offer is higher than ever. Its last payout of 15.07 euro cents (13.2p at current exchange rates) gives a running yield of 9%.

Now, the payout wasn’t covered by earnings of 11.59 euro cents (10.1p). However, it was covered by free cash flow. Nevertheless, with Vodafone planning to increase spending to acquire spectrum over the next couple of years and also having agreed to buy €18.4bn of assets from Liberty Global (expected to complete mid-2019), the market evidently fears for the dividend, even though the consensus among City analysts is positive. The way I see it, if Vodafone can get over the hump of the upcoming expenditure on higher borrowings, while maintaining the dividend, the returns for investors could be spectacular. And as I wouldn’t see a reduced dividend as the end of the world, I rate the stock a ‘buy’.

The post Why I believe the Vodafone share price and 9% dividend yield are incredible value appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Which will reach £2 first, Lloyds or Vodafone shares?
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Tracsis. 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.

One of my favourite small-cap stocks is rail and transportation data specialist Tracsis (LSE: TRCS). Shares in this £179m software firm have risen by 252% over the last five years, compared to a gain of just 18% for the FTSE 100.

Tracsis shares were up again on Tuesday, gaining 10% after the company said that profits for the year ended 31 July were expected to be ahead of market forecasts.

The company’s products and services are designed to help transport operators monitor and manage their resources. Examples include data collection from road and rail infrastructure, traffic monitoring, rail crew rostering and a wide range of other specialist services.

Why I like this so much

One of the company’s strengths is that many of its services are quite ‘sticky’. Competition is limited and once a service is installed, it becomes difficult for the customer to switch to a rival provider.

In fairness, another of Tracsis’s strengths is that it seems to be very good at what it does. So customers don’t want to leave very often.

The company’s business has expanded through a mix of organic growth and targeted acquisitions. Net profit has risen from £2.1m to £3.7m over the last five years. The group has also consistently maintained a net cash balance. This rose from £15.4m to £22m last year, demonstrating the strong cash generation of this business.

After today’s gains, I estimate that the shares trade on about 25 times forecast earnings. This isn’t cheap, especially as the dividend yield is less than 0.5%. But the growth record of this business suggests to me that it should continue to deliver. Although I’d prefer to buy on the dips, this stock could still be a good long-term buy.

Defensive profits

My next stock is a small-cap engineering business whose share price has doubled over the last five years.

Cohort (LSE: CHRT) is made up of four engineering companies operating in the defence and industrial sectors. Each firm retains a high degree of independence but benefits from a network of financial support and opportunities to share information.

This conglomerate business model is unfashionable these days. But Cohort’s track record suggests to me that, with good management, it can be very effective. The group’s adjusted operating profit rose by 7% to £15.6m last year, while its operating margin increased from 12.8% to 14%.

Net cash rose from £8.5m to £11.3m and shareholders enjoyed a 33% hike to the total dividend, which was lifted to 8.2p per share.

Order book growth?

One disappointment was that Cohort’s order book fell by 25% from £136.5m to £102.5m last year. The company says this was down to delays rather than a shortage of opportunities, and expects a high level of bidding this year.

Analysts covering the stock are taking a cautious view and have pencilled in a 4% increase in earnings for 2018/19. This may not seem very impressive, but the shares currently trade on just 12.5 times forecast earnings and offer a 2.3% yield.

In my view, this valuation suggests that the stock is priced for bad news. I believe good news is more likely. If I’m right, the shares could perform strongly from here. I rate them as a buy.

The post Forget the FTSE 100: these small-cap dividend growth stocks could help you retire wealthy 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 Cohort and Tracsis. 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.

Here are a couple of minnows that still appear to be flying under many investors’ radars.

On track

Reporting some positive interim numbers this morning was Leeds-based Tracsis (LSE: TRAC) — a business that provides software to the transportation industry.

In the six months to the end of January, revenue increased 16% to just over £18m with statutory pre-tax profit accelerating 33% to £2.4m.

Over the reporting period, Tracsis began delivering on a big deal for its software with a “major” UK train operator. It also secured the renewal of a contract with a “global engineering company” and made progress across the pond with its remote condition monitoring technology (which can help to detect faults). Since the end of the interim period, the company has also made a couple of acquisitions, Travel Compensation Services Ltd and Delay Repay Sniper Ltd.

A suitably bullish CEO John McArthur reflected that the performance on all key metrics over H1 had been “comfortably ahead of the previous year” and that management was “confident” full-year numbers wouldn’t disappoint the market. 

For those who like to own companies in rude financial health, Tracsis more than hits the spot. It had £18.5m at the end of January, in contrast to the £12.7m at the same point in 2017. There’s no debt to worry about and free cash flow continues to look excellent.

Before today, analysts were forecasting a 78% rise in earnings per share for the current year, giving the company a price-to-earnings (P/E) ratio of 22. That’s not cheap but, given the quality of the business, it might just be worth paying.

Time to buy?

Also reporting today was global media and entertainment company Time Out Group (LSE: TMO).  Shares in the small-cap have failed to capture investors’ interest since coming to the market in June 2016 and reaction to today’s annual results suggests this apathy might continue. 

As a result of underlying growth and contributions from franchisee acquisitions in Australia and Spain, group revenue increased 19% year-on-year to £44.4m. The bulk of this (£38.4m) came from its Digital division with a 57% increase in e-commerce over the reporting period, leading CEO Julio Bruno to state that Time Out was developing into a “transactional business”.

Having welcomed 3.6m visitors over the period, revenue at the company’s Market division soared by 62% to £6m. With a lease agreement now signed, Time Out hopes to replicate the success of its site in Lisbon with one in New York. Additional markets are planned for Miami, Chicago and Boston. 

So, is now the time to buy? Much of that will depend on how you feel about owning shares in a business that is still to turn a profit. Due to higher costs, Time Out revealed an adjusted EBITDA loss of £14.2m today —  34% higher than the previous year but in line with expectations. The 28.8m of cash on the company’s balance sheet was also over 40% lower than at the same time last year.

Personally, I’ll be keeping Time Out on my watchlist for now.

The post Could these ‘secret’ small-cap stocks help you achieve financial independence? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the share mentioned. The Motley Fool UK has recommended Tracsis. 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.

Although there’s a risk that you’ll be swayed by a strong sales pitch from an expert communicator — most CEOs fit this description — you can also learn a lot. Certainly when I attended a presentation given by Tracsis (LSE: TRCS) chief executive John McArthur last year, I came away impressed.

Mr McArthur’s firm specialises in providing software-based systems for the rail industry. Applications include traffic monitoring and data capture, operational planning tools and predictive maintenance systems.

The stock has risen by 10% this morning, thanks to a strong half-year trading update. Revenue rose by 15% to “in excess of £18m” during the six months to 31 January, while earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 22% to £4.3m.

Cash generation remained strong and the group ended the period with net cash of about £18.5m, which is about 12% of the share price. Several new contracts got underway during the six-month period in the UK. The group also secured new work in the US, a potentially transformative growth market.

Why I’d buy

Tracsis sells a portfolio of software systems that it’s developed and acquired. They vary widely but they’re all carefully chosen and are usually very ‘sticky’ — once a client starts using it, they’re unlikely to change.

Mr McArthur’s clear and direct presentational style is matched by the group’s accounts, which are always pleasingly clean and easy to understand. The focus on cash generation and controlled growth works well for me.

After today’s gain, these shares look quite pricey on 22 time forecast earnings. I’d be tempted to wait for the next dip before buying, but I strongly believe that this is a business that should continue to grow steadily for many more years.

A more affordable option

They say you get what you pay for. Tracsis should be fairly safe in recessions, when trading could become trickier for my next stock, Ramsdens Holdings (LSE: RFX).

Best known as a pawnbroker, this group is really a mini financial firm. It has growing profits from foreign currency exchange and personal loans, alongside more traditional pawn broking and jewellery sales activities.

Foreign exchange is a particularly big earner and generated £7.5m of gross profit during the first half of the year, out of a total of £16.1m. This seems to be a business where companies that offer competitive rates have an opportunity to take market share from more complacent rivals.

So far, so good

Ramsdens floated on the stock market one year ago, so it doesn’t yet have a very long record as a public firm. But the story so far is encouraging. Pre-tax profit rose by 63% to £5.2m during the first half of the current year, which ends on 31 March.

The group’s shares have doubled during their first year of trading but their valuation still looks reasonable to me, on 12 times forecast earnings. The balance sheet carried £13m of net cash at the end of September, providing good support for a forecast dividend yield of 3.3%.

A recession could make trading conditions more difficult for Ramsdens, but on the evidence so far, I’d suggest this could be a good dividend growth stock.

The post 2 super dividend-growth stocks you might regret not buying 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 Tracsis. 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.

Trading at over 3,200p as recently as May, shares of subprime lender Provident Financial (LSE: PFG) imploded spectacularly in the wake of two profit warnings. They’re trading at around 880p, as I’m writing.

Has the market overreacted, giving the shares potential to make strong gains for investors today, or is Provident a stock to steer clear of?

Some merit in the bull case

The profit warnings were due to problems in Provident’s consumer credit division, which last year contributed £115m (33%) to group profits. A change of operating model from self-employed doorstep agents to full-time ‘customer experience managers’ aided by technology hasn’t gone smoothly. The company warned in July that the division’s profit this year would be down to £60m and then, just a month later, that it would make a loss of between £80m and £120m.

The chief executive has departed and the company reported last month that the consumer credit division has been stabilised under a new leadership team. This news prompted my Foolish colleague Alan Oscroft to argue that the shares are undervalued. Despite the company also facing a Financial Conduct Authority investigation into one of its banking products, I see some merit in the bull case.

Changing scene?

However, while Provident has made hay since the financial crisis, I’m concerned that the scene is now set for growth to be harder to come by for subprime lenders. Consumer borrowing is at an all-time high, interest rates are rising and inflation is running well ahead of wage increases. Bad debts could be set to balloon and the company may have to tighten its credit standards (in fact, it’s already started to do so). On this basis, I’m avoiding Provident for the time being.

Positive outcome

Shares of software firm Tracsis (LSE: TRCS), which specialises in rail and traffic systems and services, fell heavily in February. In a half-year trading update, the company said meeting full-year expectations was dependent on the timely conversion of new sales in the second half of the year and delivery of its gross margin improvement initiatives.

In these circumstances, the risk of a profit warning increases and it’s not always easy to judge whether the depressed share price is good value. In the case of Tracsis, the outcome has been positive. There was no profit warning and full-year results today actually came in ahead of market expectations.

Good growth prospects

The company posted revenue of £34.5m, a 6% increase on last year and £0.5m ahead of forecast. Adjusted earnings per share came in 4% higher at 24.08p, compared with a forecast 4% decline to 22.2p. It ended the year with cash of £15.4m (up from £11.4m at the end of the previous year) and no debt.

Management said: “The Group continues to hold a great position within our respective markets. Our financial strength coupled with favourable market conditions and good customer momentum provides a good platform for growth in the year to come.”

The shares are trading 4.5% higher at 522.5p, valuing this AIM-listed firm at £147m. The trailing P/E of 21.7 may look on the high side but with the cash pile representing 55p a share, the cash-adjusted P/E comes down to a more palatable 19.4. And with good growth prospects ahead, the shares look very buyable to me.

The post Why I’d buy this turnaround stock ahead of Provident Financial plc appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Tracsis. 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’s news from Tracsis (LSE: TRCS) is a good example. Shares of this transportation software firm have risen by 480% over the last five years. But they fell by 14% on Wednesday, after the group issued a cautiously worded trading update.

The bad news

Although first-half sales of £15.5m were 18% higher than last year’s comparable figure of £13.1m, the outlook appears uncertain. Tracsis warned that the timing of “anticipated” software sales meant that profits would be weighted towards the second half of the year.

The group also said that in order to hit full-year profit forecasts, it would need to rely on the “timely conversion of new sales” and on delivering savings from cost-cutting initiatives. In my view, these comments suggest Tracsis is getting close to issuing a profit warning. The firm is hoping to win enough new sales to avoid this fate, but hasn’t done so yet.

Downside protection

The good news is that Tracsis has historically been profitable and highly cash generative. Net cash was £11.4m at the end of July last year, and the group has no debt.

A shortfall in new sales is unlikely to cause financial problems. This should limit the downside risk for shareholders, who will still have the value of the group’s established business to fall back on.

However, that doesn’t mean that Tracsis shares won’t have further to fall. As I write, the stock is trading at 408p. That’s equivalent to a P/E of 17, based on consensus forecasts for earnings of 24p per share this year.

That still looks too pricey to me, especially as these forecasts may be cut following Wednesday’s update.

I believe a profit warning is more likely than not after this week’s news. In my view, the sensible thing for potential buyers to do is to stand back and await further developments. Existing shareholders may want to reduce the size of their holdings.

Will this stock warn on profits?

FTSE 350-listed NMC Health (LSE: NMC) has risen by 244% over the last two years. This little-known group operates healthcare services in the United Arab Emirates.

NMC’s adjusted profits rose by 48% to $67.8m during the first half of 2016, thanks partly to five major acquisitions between June 2015 and June 2016. However, the majority of these deals were funded with debt, and net debt has now risen from $113m in 2014 to $790m.

To put this in context, the group made a net profit of $77.5m in 2014. In 2017, it’s expected to report a profit of $199.5m. Looked at in this way, the increase in net debt isn’t unreasonable and may well be justified by future growth.

Despite this, I’m not sure that NMC is a compelling buy at these levels. The stock currently trades on a 2017 forecast P/E of 22 times. The shares could fall sharply if earnings growth falls below forecast levels. Debt could also become problematic.

There’s no way for us to know whether NMC is likely to issue a profit warning. But debt-fuelled growth and an aggressive valuation make this stock a risky bet for equity investors, in my opinion.

The post Are these explosive growth stocks about to crash? appeared first on The Twelfth Magpie.

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

Brexit-proof finance?

IFG Group (LSE: IFP) has a market cap of just £150m and its shares have lost 9% over the past 12 months to 145p — a lot of the drop coming in response to its first-half report in August despite strong rises in profits and an 11% hike in the interim dividend.

Today, the financial services group, which has listings in both London and Dublin, gave us a further update. The firm provides retirement and IFA services and told us that it “continues to perform in line with management expectations” as outlined at the halfway stage. Back then Tracsis spoke of “continued market volatility as well as political and policy uncertainty in the UK” and said it expects full-year revenues to be hit by the base rate fall among other things.

But even after forecasts were downgraded to account of that, they still suggest a 5% rise in EPS to put the shares on a forward P/E of 17 with a dividend yield of 3.3%. That might not sound great in itself, but a further 18% EPS gain predicted for 2017 would drop the P/E to 14.5, and the mooted divided would yield 3.6%.

Since 30 June, IFG’s total assets under management have grown 8% to £26.4bn, and are up 12% since December 2015, suggesting there’s no problem with confidence among the firm’s customers.

Although the effects of the Brexit vote and the subsequent economic actions have caused some trouble for IFG, I see its having a foot in Europe via its Dublin headquarters as potentially helping to offset that, and I reckon it’s a small-cap that deserves further attention.

One to watch

Another small cap share in the news today is Tracsis (LSE: TRCS), a £140m company that provides “software and services for the traffic data and transportation industry.“

Telling us of a “further period of solid trading,” Tracsis today reported a 29% rise in full-year revenue, which beat expectations, leading to an 18% boost to adjusted pre-tax profit and a 22% lift to adjusted earnings per share. The total dividend was hiked 20% to 1.2p, which provides only a yield of 0.2% on the current 523p share price. But this is very much a share for growth investors right now rather than income seekers.

A forward P/E of more than 20 needs to be seen in the same light so what are the current growth prospects looking like for Tracsis?

Forecasts currently suggest only 3% growth in EPS by July 2017, but the longer term looks promising to me. Chief executive John McArthur spoke of having started the year by placing “solid foundations,” from which the second half was “one of delivery.” The firm made some key acquisitions during the year too, and a major order from a US railroad operator for the supply of Remote Condition Monitoring hardware and software could set it up for some significant international expansion.

Tracsis isn’t without risk, but small-cap growth investors should take a closer look.

The post Do today’s results make IFG Group plc and Tracsis plc unmissable small-caps? appeared first on The Twelfth Magpie.

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

Sales beat forecasts

Rail and traffic management software firm Tracsis (LSE: TRCS) says it expects to report sales of more than £32m for the year ending 31 July. That’s significantly above City forecasts of £27.6m.

Tracsis says it has had a strong year.  The group’s core divisions have made good progress and acquisitions have boosted growth elsewhere. Net cash was £11m at the end of the year, despite a £7m net outflow of cash spent on acquisitions.

Earnings are expected to be in line with forecasts of 19.9p per share for last year. Forecasts suggest they will rise by 10% to 22p during the current year.

This puts the stock on a 2016/17 forecast P/E of 23. This may seem expensive, but Tracsis shares rose by 20% last week, after the group announced a breakthrough contract in the US.

If Tracsis can become a major player in the US market, then today’s share price could look cheap within a few years.

These shares could fly

Aircraft leasing specialist Avation (LSE: AVAP) has leased a new Airbus A321-200 to Vietnamese carrier Vietjet. It’s the latest in a series of deals that has seen the group’s profits rise from $0.098 per share in 2010 to $0.24 per share last year.

However, while Avation’s earnings per share have risen by 145% since 2010, the firm’s share price has risen by just 88% since its flotation in October 2010. This means that Avation now trades on a trailing P/E of just 7.3.

One concern among investors is that the group’s net debt of $409.5m is quite high relative to the $518m valuation of the firm’s aircraft fleet.

A second risk is that airline growth may be starting to slow. A fall in fleet utilisation or a rise in interest costs could cause problems for Avation.

City analysts have trimmed their forecasts recently, but still expect earnings per share to rise by 39% to $0.32 this year. This puts Avation on a forecast P/E of just 5.6. If you remain confident about the outlook for air travel, these shares could be worth a closer look.

Rapid sales growth?

Information management group Idox (LSE: IDOX) reported its second acquisition in two months this morning. The firm spent £2m on a digital marketing agency called Rippleffect Studio, whose customers include JD Wetherspoon and Liverpool Football Club.

Idox is hoping to increase annual revenues from £62.6m to £100m over the next few years. Progress so far has been good. Revenue rose by 27% to £37.2m during the first half of this year, while pre-tax profits climbed 110%, to £6.5m.

However, while Rippleffect generated £6.3m of revenue last year, its net profit was just £34,934. Private companies usually try to minimise profits for tax reasons, but Idox shareholders need to make sure their company isn’t boosting sales figures while diluting the group’s profit margins.

Idox shares currently trade on about 19 times 2016 forecast earnings. I’d say that’s about right for now, and would rate the shares as a hold.

The post 3 top small-cap growth buys for today? appeared first on The Twelfth Magpie.

More reading

• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• 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?

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