But the world of investing is full of advice on investing strategy, much of it conflicting. Listen to an investing guru and he or she will tell you one thing, but listen to another and the advice might contradict the first. Of course, in the final reckoning, your investing style and strategy must evolve to become a very personal thing.

Recovery in full swing

To me, if I like the ‘story’ behind a company, and if the value and quality indicators stack up along with a compelling argument for upside potential, why shouldn’t I buy the share because it’s going up? The ‘going up’ strikes me as a powerful endorsement that the rest of my analysis might be correct.

Well, I like the look of electrical accessories and components supplier Volex (LSE: VLX), and that’s going up. Since its nadir three years ago, the share price is more than 260% higher at today’s 102p. That’s not a bad rate of return, is it? But I think there could be more to come for shareholders.

At first glance, the valuation seems reasonable. The forward-looking price-to-earnings ratio for the trading year to April 2020 stands near 8.6. Then, with the market capitalisation at £150m and the enterprise value close to £131m, it seems Volex has net cash on the balance sheet, which encourages me to believe the company’s financing is in order.

Meanwhile, today’s full-year report reveals trading has been going well. Revenue increased by just over 15% compared to the previous year and underlying diluted earnings per share shot up nearly 43%. The report trumpets that “the recovery at Volex continues,” and the directors anticipate announcing the reinstatement of shareholder dividend payments with the interim results next November.

Better profits and grabbing market share

However, not all the progress is organic. The firm made three acquisitions during the period, which executive chairman Nat Rothchild said in the report “added new customers, capability and geographic presence to the Cable Assemblies division.” 

On top of that, Rothchild explained the firm spent the year ‘refreshing’ its customer base and growing its business with “new and existing customers.” Increased profits mean Volex is in “a much stronger position than it has been for many years.”

The company expects its core markets to “remain highly competitive” in the near term but the firm is driving operational progress with a focus on better execution and gains in market share. Sometimes, I reckon, decent shareholder returns can come from firms operating in sectors that seem unlikely to produce good investments, such as with Volex.

And I can’t argue with the progress of the stock, although I don’t believe we’re likely to see a valuation up-rating. The low-margin, cyclical nature of the business demands a modest rating, in my view. That said, I find the share to be attractive right now. 

The post Am I wrong to back this value small-cap because it’s going up? appeared first on The Twelfth Magpie.

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• 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?
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Kevin Godbold has no position in any share 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.

Managing wealth 

IFG (LSE: IFP) is a financial services group based in Ireland. With a market capitalisation of around £150m, the company flies under the radar of most institutional investors, but I believe it could be a great addition to any portfolio.

Over the past five years, IFG’s results have been mixed. Revenue has hardly grown, and the business reported a net loss last year, down from a net profit of around £22m in 2012. These figures are disappointing, but they don’t display the whole picture. Excluding one-off items, normalised earnings per share (EPS) have increased by 150% since 2012.

City analysts are expecting this trend to continue. EPS growth of 37% is forecast for 2018 and 16% for 2019.

It looks as if the business is well on the way to meeting these figures.

IFG’s preliminary statement for the half year ended 30 June shows a 42% increase in adjusted EPS to 4.2p. For the period, revenue expanded 12% and adjusted operating profit grew 54% to £5.7m.

The company has been boosted by rising demand for self-invested personal pensions or SIPPS. For the six months to the end of June, 2,469 new SIPPs were opened with the group’s James Hay wealth management business, and a further 134 clients opened new SIPPs with its Saunderson House business. Overall assets under administration rose 8% to £31.bn.

Unfortunately, the firm is also dealing with the number of legacy issues that have “significant taxation and regulatory components.” Dealing with these problems consumed £3.2m of profit during the first six months of the year.

I reckon this dark cloud is to blame for IFG’s low valuation of just 13.2 times forward earnings. That said, I’m attracted to the company because once these legacy issues are complete, shares could re-rate substantially higher. There is also a 3.2% dividend yield on offer while you wait.

Return to stability 

If IFG’s complex legacy issues have put you off, another small-cap growth stock I’m interested in is Volex (LSE: VLX).

After losing a significant contract in the first half of this decade, Volex has spent the last several years trying to rebuild its business. Fiscal 2018 was the first year in five that the group has reported a positive net profit.

However despite the progress, it looks to me as if the market isn’t ready to give the company the benefit of the doubt just yet. Based on the City’s number for fiscal 2019, the stock is trading at a forward P/E of only 9.7.

I believe this is an excellent opportunity for risk-tolerant investors to buy into the company before the rest of the market. I reckon buyers will return when management can prove it has stabilised the business, which will take several years. Analysts believe normalised earnings per share will grow by around 10% for the next two years. If the group can meet these figures, it should be proof enough that Volex has moved on from its previous troubles.

Adding to the investment case is $10m of net cash on the balance sheet, which only makes this a more attractive investment opportunity in my opinion.

The post Two small-cap growth stocks I’m considering today appeared first on The Twelfth Magpie.

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• 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?

Rupert Hargreaves owns no share 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.

However, global cybersecurity and risk mitigation expert NCC (LSE: NCC) seems to have missed this opportunity.

Growing pains

As demand for cybersecurity expertise has spiked, NCC has seen the value of its shares fall by 40% year-to-date following two profit warnings. 

To try and stem the bleeding, management commissioned a strategic review, and it looks as if these actions are starting to pay off. Indeed, today the company published a trading update covering the three-month period from 1 June to 31 August ahead of its Annual General Meeting showing a 5.6% increase in continuing revenue to £62.7m. Management also reports that “implementation of the Strategic Plan is gathering momentum with a number of new initiatives underway.” The disposal of several non-core businesses is also progressing well. 

NCC is trying to turn itself around in the perfect environment. The size of its end market is multiplying, providing a tailwind to group growth. And I believe that this tailwind, coupled with management’s actions to restructure NCC’s offering, should lead to returns for investors in the months and years ahead. 

City analysts are already projecting a recovery next year with earnings per share growth of 13% pencilled in for the fiscal year ending 31 May 2018, followed by growth of 16% for the following year — a dramatic turnaround from last year’s decline of 43%. 

NCC isn’t the only turnaround story I believe it’s worth keeping an eye on. Cable solutions supplier Volex‘s (LSE: VLX) turnaround is also starting to gain traction after years of drastic cost-cutting and restructuring by management.

Beginning to pay off 

Volex’s problems began in 2012 when the company lost its primary customer and sales slumped. After hitting a high of 375p at the beginning of 2011, shares in the enterprise crashed to a low of 27.5p during 2016 as losses hit $8.5m. 

However, this year the firm’s fortunes have started to improve. For the year ended April 2, restructuring and cost-saving measures increased underlying operating profit, which strips out exceptional costs, by 26.6% to $9.1m, while underlying pre-tax profit grew 35% to $7.2m. Meanwhile, net cash rose to $11.3m from net debt of $3.2m in the year-ago period due to a focus on cash generation.

During the year, Volex secured purchase orders from four new customers, two in the online technology space, one from an electric car manufacturer, and the last one from a US engineering firm. So the company’s turnaround finally appears to be yielding results, and it seems customers are still interested in its offering. 

According to City analysts, earnings per share will fall around 11% for the year ending April 2018, as it seems the group will have to book further exceptional costs. Still, for 2019, lower one-off costs and a return to growth is expected with earnings per share of 6.3p projected. 

The post Two top turnaround stocks that could make you rich 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?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of NCC. 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.

Bright future

The recent update from electrical component and control equipment manufacturer, Dewhurst (LSE: DWHT), showed that it is making encouraging progress. In the first half of the year it recorded sales growth of 22%, with pre-tax profit up 76%. Its performance was aided by a weaker pound, with revenue of £26.1m receiving an uplift of around 10% due to currency fluctuations. However, the company also achieved growth in local sales values at all of its companies, with its North American operations being the only area where revenue declined.

The company’s outlook outside of the UK remains positive according to its recent update. While the UK may be experiencing a slowdown after the general election and as Brexit talks commence, demand in Australia and parts of North America continues to be robust. This is set to contribute to a rise in earnings of 19% in the current financial year. Since Dewhurst trades on a price-to-earnings (P/E) ratio of 16.7, this equates to a price-to-earnings growth (PEG) ratio of only 0.9. This suggests that it offers a wide margin of safety and could be worth a closer look.

In addition, dividends per share are set to be covered 4.1 times by profit in the current year. This suggests that the company’s dividend yield of 1.7% could increase over the long run and add to its attraction as an investment.

Cheap price

While Dewhurst may have a wide margin of safety, it is not the only stock to do so. Supplier of power cords and cable assembly solutions, Volex (LSE: VLX) trades on a P/E ratio of just 10.2 at the present time. This suggests its share price could continue to rise even after its 86% gain during the course of the last year.

One reason for the company having a low rating could be its volatile bottom line. Over the past five years it has been lossmaking in three of them, while sharp improvements in profitability have generally followed. Investors may therefore be including a discount to the company’s valuation in order to protect against further volatility. However, next year profit is expected to rise by 11%, which puts the company’s shares on a PEG ratio of only 0.7. This suggests they offer growth at a reasonable price.

While Volex does not currently pay a dividend, its low valuation could make it a relatively attractive stock at the present time. Many stocks are trading at or near record highs at present, which could make cheap stocks even more in demand among investors.

The post These small-cap stocks are trading at large discounts 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?

Peter Stephens has no position in any 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.

Cables in demand

Volex (LSE: VLX) makes cables — data cables, power cables, both standard and customised. On the plus side, there’s massive worldwide demand for such things. But there are also plenty of competitors, many a lot bigger, making the same kind of stuff.

Volex has manufacturing plants around the globe, mostly in Asia, and that suggests it’s pretty well shielded from Brexit effects and from the plunge in the pound. But it really is a very small company, with a market cap of just £33m, and it’s in a low-margin business — which in my eyes makes it risky.

What’s more, the share price has had an erratic ride, and is down 32% in the past 12 months, to 36.4p, and down 86% over five years. So is there any reason to consider buying?

First-half results released today show that, in the words of chief executive Nat Rothschild, “underlying profitability has been maintained,” and that’s despite a “continuing decline in revenues from several of our larger customers.” In fact, although sales fell by 12.3% to $166.1m from the first half last year, underlying operating profit improved by 2.3% to $4.3m and underlying pre-tax profit remained stable at $3.3m (see what I mean by a low-margin business?)

Good news for the longer term is that cash flow was strong and net cash stood at $5.2m (from a $5.4m deficit a year previously).

Forecasts suggest two years of strong EPS growth, which would put the shares on a P/E of 10 by march 2018, with attractive PEG ratios of 0.2 this year and next. On those figures, Volex shares look good value — but don’t forget the small-cap risks.

Construction prospects

Interserve (LSE: IRV) is a significantly bigger company with a market cap of more than £500m, but still a tiddler compare to the FTSE 100 giants. And Interserve’s shares are down a similar 33% over the past 12 months, to 364p.

It’s in a very different business to Volex, offering construction and support services, but that’s also a very competitive market. And Interserve is also another ‘picks and shovels’ company offering business-to-business services. I tend to like those.

Its earnings have grown nicely over the past few years, though we do have a couple of flat years forecast for this year and next. But earnings should be enough to cover predicted dividend yields of around 8% — and the shares are on a lowly P/E of just 5.7 for the current year, dropping to 5.3 next.

I really can’t see a good reason for such a low valuation.

First-half results did show a pre-tax loss of £33.8m, but there was a one-off exceptional charge of £70m that included the impact of exiting the Energy from Waste sector. There’s debt, but it’s coming down, and should stand at around £300m to £320m by year-end.

That will account for some of the low P/E, but with chief executive Adrian Ringrose telling us the full-year outlook is unchanged despite Brexit, and that Interserve enjoys “significantly improved cash flow and healthy future workload,” I see a bargain here.

The post Can these small cap growth stocks boost your profits? appeared first on The Twelfth Magpie.

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• 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?

Alan Oscroft 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.

I’ll start with Prudential (LSE: PRU), which is down 19% over the past 12 months to 1,313p, and up just a fraction from its 12-month low just a few days ago. Prudential is aptly named, and it’s pretty much a byword for a conservatively well-managed company. It was never stretched, and sailed through the financial crisis practically without even noticing it.

And now its shares can be picked up on a P/E multiple of 12 based on expected earnings for the year just ended, dropping to 11 on December 2016 forecasts. The forecast dividend yield for 2016 is up to 3.4%. That’s not the highest in the sector, but in accordance with the Pru’s approach it would be around 2.7 times covered by earnings.

The third quarter was very solid again, with new business profit up 13% after strong growth in UK and Asian business, leading chief executive Mike Wells to speak of optimism, even in the long-term outlook for Asia. To me, Prudential looks like one of those investments where you surely can’t lose.

Cheap bank

I’ve not been much of a fan of Royal Bank of Scotland (LSE: RBS) since the post-crash recovery started, largely because it’s been the slowest to get its act back together. But with the dreadful start to 2016 helping push the bank’s shares down 32% in 12 months to 249p, taking in a new 52-week low just a few days ago, even I can’t ignore it.

The bank came through the 2015 Bank of England stress tests reasonably comfortably, and is poised to report its first proper profit for years when 2015 results are revealed — due on 26 February. The latest estimates, which surely can’t be far out at this stage, would suggest a P/E of 10.4, which looks cheap.

Dividends should be back in the coming year, and though there’s only a modest 0.4% yield forecast, 2017 should see that being hiked significantly. On its own fundamentals, RBS looks a decent investment to me — but I’d still steer clear of it while I’m seeing better bargains in the shape of Lloyds and Barclays.

Picks and shovels

Volex (LSE: VLX), the maker of a multitude of cabling and interconnect products, was something of a late September dog when a profit warning caused the share price to tumble, contributing to a 47% fall from July’s peak to today’s 44.5p.

But we had a management restructuring in December, and the City bods are predicting a more-than-doubling in EPS for the year to March 2016, which would give us a P/E of only around 11 — and a further 50% EPS rise penciled in for 2017 would drop that as low as 7.5, which looks super cheap to me, despite the absence of dividends.

In these bearish times people are usually looking for safety, but we mustn’t forget that there are still smaller cap growth opportunities out there, and Volex looks like a promising candidate to me.

The post 3 Unmissable Bear Market Bargains: Prudential plc, Royal Bank of Scotland Group plc, Volex PLC? appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With this in mind, I screened the market for the top small-cap growth stocks. Here are just five of the screen’s results.

All companies have a market cap between £50m and £150m with a price to earnings growth ratio of less than one. 

Leading toymaker

Character (LSE: CCT) is one of the UK’s leading toymakers and sales are booming. 

The company manufactures branded children’s toys including the Peppa Pig, Scooby Doo, Doctor Who, Fireman Sam and Weebles brands. 

And sales have really taken off over the past year. For the six months to 28 February 2015, Character reported record revenues and profits. Pre-tax profit jumped 178% year on year while revenue increased by a quarter. 

Further growth is predicted for the rest of the year. City analysts believe that Character’s earnings per share are set to jump by 51% for full-year 2015. The company is currently trading at a forward P/E of 10 and a PEG ratio of 0.2. 

Booming home sales 

Inland Homes (LSE: INL) is a great small-cap play on the UK’s booming housing market. City analysts have pencilled in 70% earnings per share growth for Inland during 2015, suggesting that the company is trading at a forward P/E of 14.5. These figures indicate a PEG ratio of 0.2. 

Analysts believe that Inland’s earnings will expand a further 18% during 2016, which means that the group is trading at a 2016 P/E of only 12.4. Inland currently yields 1.2%.

Slow and steady 

Education support services company Tribal Group’s (LSE: TRB) growth isn’t anything to get excited about, but the group’s low valuation, combined with its stable earnings growth, earns it a place on this list. 

Tribal’s earnings are set to expand 13% during 2015 and 10% during 2016. According to City figures, the company currently trades at a forward P/E of 11.4 and 2016 P/E of 10.4. This low valuation coupled with Tribal’s double-digit growth rate means that the group is trading at a PEG ratio of 0.9.

Tribal currently yields 1.4%. 

Boring is good

Victoria (LSE: VCP) is an international carpet producer and distributor… hardly the most exciting business in the world. 

Nevertheless, demand for carpets is taking off and Victoria’s earnings per share are set to jump by 36% this year. The company is currently trading at a relatively demanding forward P/E of 25.7, although when compared to Victoria’s projected earnings growth, this valuation isn’t overly concerning. Victoria currently trades at a PEG ratio of 0.7.

According to City figures, the company’s earnings are set to grow a further 41% during 2016. Victoria is trading at a 2016 P/E of 18.3. 

Recovery in progress 

The last company on my small-cap growth list is Volex (LSE: VLX). Volex has struggled to turn a profit during the past two years, as falling sales and a drastic restructuring program have taken their toll on results. 

Nevertheless, according to the City’s figures, Volex is set to return to growth during 2016. Specifically, Volex’s earnings per share are set to rise 126% during 2016. This means that the company is trading at a 2016 P/E of 13 and PEG ratio of 0.1. 

Earnings growth of 20% is expected during 2017 and Volex is trading at a 2017 P/E of 9.4. 

The post 5 Small-Caps With Big Ambitions: Character Group plc, Inland Homes PLC, Tribal Group plc, Victoria PLC & Volex 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?

Rupert Hargreaves 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.