Here are three that City analysts expect to be trading at least 41% above their current share prices by this time next year. And while such forecasts and individual dividends can’t be relied upon, these stocks do offer decent passive income potential.

4imprint

4imprint (LSE:FOUR) is a direct marketer of promotional products, helping businesses and organisations put their logo on items like T-shirts, pens, mugs, and water bottles. 

While a niche market, 4imprint is a leader in North America, which helped drive strong growth for years. However, the FTSE 250 firm has recently been hit by slowing orders due to macroeconomic challenges and tariff uncertainty.

Revenue and pre-tax profit both fell 2% last year, to $1.35bn and $151m respectively. And management has warned that margins may take a slight hit in 2026, sending the stock down nearly 10% year to date.

However, this is still a very well-run company, with a highly cash-generative business model. It ended 2025 with cash and bank deposits of $132.8m, while maintaining the dividend at the same level as 2024.

Currently, the stock offers a 5.16% dividend yield and is trading 41% below an average broker price target of 4,930p. It’s currently out of favour due to macroeconomic uncertainty, but it could snap back sharply if and when conditions improve.

Keystone Law

Keystone Law (LSE:KEYS) is a tech-enabled law firm that uses a platform model rather than a traditional partnership structure. It allows lawyers to work for themselves, and last year added 61 new senior lawyers, taking the group’s total number of fee earners to 654. 

In February, the £160m company issued a trading update for the fiscal year ending 31 January. It expects to report revenue of roughly £109m, up 11% year on year, and adjusted pre-tax profits of £14.4m (up 20%).

The biggest risk I see here is a sudden downturn in the UK economy, which remains fragile and badly exposed to a spike in global energy prices. This could see lawyer billings drop.

Longer term though, I’m bullish on Keystone Law, as it operates quite a disruptive model in the legal industry and is attracting top talent. The stock currently sports a forecast dividend yield of 4.6%, while trading 79% below analysts’ price target of 906p.

Ramsdens

Finally, Ramsdens (LSE:RFX) is a £117m high street retailer offering foreign currency exchange and pawnbroking services. The share price has performed very strongly, surging 71% higher over the past year.

This is due to the rocketing gold price, which is encouraging more people to cash in their jewellery. Elevated precious metal prices are expected to help drive pre-tax profits nearly 30% higher to £21m in the year to 30 September 2026.

Of course, it’s worth pointing out that the share price has recently been responding to the gold price, so a fall in the yellow metal is a risk. However, Ramsdens plans to open between eight and 12 new stores this year, so it’s very much in growth mode right now.

The forward yield here is 4.4%, with a 550p share price target (52% higher).

The post 3 passive income stocks tipped to soar 41% (or more) by 2027 appeared first on The Twelfth Magpie.

However, analysts see far more potential in these three stocks…

An undervalued blue-chip stock

In the large-cap space, analysts are very bullish on shares in London Stock Exchange Group (LSE: LSEG). Currently, the average price target here is 12,739p – 35% above the current share price.

The bullish stance here makes sense to me (I’m invested in this company). Today, LSEG’s one of the world’s leading providers of financial data to banks and investment managers.

However, right now, this isn’t reflected in its share price. Currently, the company’s trading on a price-to-earnings (P/E) ratio of just 21 using the 2026 earnings forecast, which is a low valuation for a software company with recurring revenues and a blue-chip institutional client base.

Now, there’s no guarantee analysts’ price target will be hit, of course. Especially if near-term growth’s weaker than expected.

I believe there’s value on offer here however. I’ve been buying the stock recently and I think it’s worth a look.

Potential for gains and income

In the FTSE 250, Pollen Street‘s (LSE:POLN) a stock analysts like. It’s a fast-growing alternative investment manager that offers private equity and private credit strategies.

The average price target here is 1,051p. That’s about 25% above the current share price, signalling that analysts see strong returns ahead in the medium term.

It gets better though. At present, this stock has a 6.6% dividend yield, so it could be a cash cow too.

I think this stock looks really interesting right now and is worth checking out. The alternative investment industry is growing at break-neck speed today yet this stock can still be picked up on a P/E ratio of 10.7 with a yield of 6.6% – what a deal.

Of course, some kind of freeze-up in the financial markets is a risk in the short term. Taking a long-term view however, I see a lot of potential and think it’s worth further research.

A scalable small-cap company

In the small-cap arena, analysts expect Keystone Law (LSE: KEYS) to do well. It’s a law firm that operates a scalable platform model in which lawyers can work remotely.

The average price target here is 795p. That’s about 33% above the current share price.

I think 795p’s achievable in the medium term as this company’s growing at a healthy rate and the valuation isn’t high. But a lot will depend on the UK economy as the legal industry is quite cyclical in nature.

If the economy rolls over, this stock could underperform. That said, if the economy experiences a period of weakness, Lloyds – which is often viewed as a proxy for the UK economy – is likely to underperform as well.

I like the scalable nature of this company however, and believe it’s worth considering as a long-term investment. It’s also worth noting that this stock has a yield of about 3.4%. So it offers potential for income too.

The post These 3 UK stocks will smash Lloyds shares over the next year, according to City analysts appeared first on The Twelfth Magpie.

It’s now feared that inheritance tax relief on AIM-listed companies will be scrapped. This may force financial advisers to recommend their clients sell AIM stocks. This is due to ‘consumer duty’ rules, designed to protect clients from potential losses that advisers could have foreseen.

Many UK small caps, including the majority of penny stocks, are listed on the junior market. According to estimates from Peel Hunt, a City investment bank, the ending of this tax break could cause an immediate 20%-30% drop in the value of AIM-listed shares.

Uncertainty all round

Now, it needs pointing out that we don’t know what will happen in the budget. There might be no change at all. The FTSE AIM All-Share Index is only down 1.3% in the past month, so it seems investors are currently sanguine about this.

If this does happen, though, it would clearly be bad for a market that is already struggling to attract listings. Indeed, the London Stock Exchange has said the number of companies on its junior market has dropped to 704, compared to 1,694 back in 2007. Rising volatility is unlikely to encourage more private businesses to list.

It’s estimated that axing the tax break could potentially raise £1.6bn a year. That’s a drop in the ocean in the grand scheme of things (enough to pay government debt interest for a few days).

Therefore, I think it’d be a short-sighted move. Then again, I currently have five AIM-listed shares in my portfolio, so perhaps I’m biased.

How I’m reacting

A significant sell-off and declining market valuations could hinder AIM-listed companies’ ability to attract funding. Yet their immediate day-to-day business operations may not be directly affected.

So, I’d see a small-cap crash as an opportunity to buy the fear, to paraphrase Warren Buffett. One AIM stock I’d certainly like to buy 30% cheaper is Keystone Law Group (LSE: KEYS).

The network-style law firm, which has a £182m market cap, operates a platform where lawyers work as self-employed consultants. This allows for scalability without the high fixed costs of traditional companies.

Keystone has been growing revenue at a decent rate and is solidly profitable. The stock also offers a 3.2% dividend yield.

In the first half, revenue grew 8.3% year on year to £46.5m, while 153 new “high-calibre” lawyers made applications during the period.

Looking forward, a significant economic downturn could impact earnings growth. Also, the UK is now seeing an exodus of wealthy residents (Keystone provides a range of legal services often required by wealthy individuals).

However, I still think there’s a significant organic growth opportunity. As many law firms push for a return to the office, Keystone’s flexible model allows lawyers to work remotely and independently, potentially making it more attractive.

Plus, the company is led by founder James Knight, which I find appealing. Founder-CEOs often prioritise long-term business decisions, which aligns well with my own Foolish investing philosophy.

If there’s a Halloween scare in AIM stocks, I’ll be buying this one for my ISA portfolio.

The post My ISA is ready for a 30% penny stock crash on 30 October! appeared first on The Twelfth Magpie.

Here are three I’d consider investing in this October if I had money sitting idle in an ISA.

Ashtead Technology

The first stock is Ashtead Technology (LSE: AT.). I invested in it back in January at 596p. By May, it had rocketed to 880p. Now? It’s dropped back at 582p! Talk about a rollercoaster ride.

This is an undersea equipment rental provider for the global offshore energy sector. It has a £467m market-cap.

In H1, revenue surged 61.4% year on year to £80.5m, while adjusted pre-tax profit jumped 38.6% to £19.6m. Both were record highs.

Analysts see earnings rising by 52% over the next two years. So this is a high-growth business.

One risk though is that most of the firm’s growth is down to acquisitions. While this is working out well, it also opens up the risk of overpaying for businesses, eroding shareholder value in the process.

Still, I rate this stock highly. The long-term structural growth of offshore wind infrastructure should support strong growth in future. And most of the firm’s equipment is interchangeable between renewables and oil and gas. I like this optionality.

Based on earnings forecasts for FY25, the stock’s trading on a forward P/E ratio of 14. I think that represents great value for a high-quality growth stock.

hVIVO

Next up is hVIVO (LSE: HVO), a leader in running human challenge trials. These are where volunteers are deliberately exposed to a virus or pathogen to test a treatment.

My mate got me onto this one. He does these paid trials, he says, to contribute to scientific progress. Whatever his motivations, I owe him a pint because the stock’s doubled over the past 18 months.

Growth has been strong, with revenue rising 30.6% to £35.6m during H1. Basic adjusted earnings per share (EPS) jumped 30.6% to 0.81p.

Management said 100% of this year’s £62m revenue guidance is fully contracted, with good visibility into 2025. By 2028, it’s targeting £100m in revenue.

This growth will be supported by its brand new facility in Canary Wharf. This is the world’s largest human challenge trial unit.

One risk here might be increasing competition in the field, which could erode hVIVO’s market share and profitability.

The market-cap is just £192m, giving the stock a reasonable forward P/E ratio of 17.5.

Keystone Law

Lastly, we have Keystone Law Group (LSE: KEYS). It operates a platform for lawyers, allowing them to work flexibly and take home around 75% of cash collected from their clients (higher than usual).

Keystone’s scalable business model enables it to efficiently onboard new lawyers, supporting continuous growth. It now has 557 legal professionals, up from 279 in 2018.

Again, competition could be a risk. As more firms adopt flexible, tech-enabled models, it might face up-and-coming challengers.

For now though, the £197m group’s chugging along nicely. Revenue grew 8.3% to £46.5m in H1, while basic adjusted EPS increased 7.3% to 14.6p.

The forward P/E multiple’s higher at 22.5. But the stock also carries a 3% dividend yield, underpinned by strong cash generation.

The post 3 FTSE AIM 100 stocks I’d consider snapping up in October appeared first on The Twelfth Magpie.

“Unprecedented” outflows from UK smaller company funds over the past two years could become a catalyst when investor sentiment improves, Ensor said. To me, that means small-cap shares, trusts and funds look set to do well in the coming months and years.

The fund’s top holding

One way of playing the theme is via small-cap vehicles like the UK fund Ensor manages. But my preference is to research small-cap companies and pick individual stocks to hold.

However, scanning the holdings of small-cap investment funds can be a good jumping-off point. River and Mercantile UK Micro-cap Investment Company lists its top holding as Keystone Law (LSE: KEYS), which accounted for 5.6% of the fund’s assets at the end of 2023.

It’s a full-service, “tech-enabled and challenger” law company with a compound annual growth rate (CAGR) for normalised earnings near 20%. I’m impressed by the way the firm even increased its earnings every year through the pandemic.

There’s a robust balance sheet here, which shows a net cash position rather than net debt. But as well as the prospect of further earnings growth ahead, there’s also a dividend for shareholders to collect.

With the share price in the ballpark of 547p, the forward-looking yield for 2024 is a just above a decent 3.7%. That suggests Keystone Law has potential to make a good investment for total returns if operations go well.

Meanwhile, the stock is well down from its highs of 2022, although it’s been trending up again since last summer.

In September 2023 with the half-year results report, the company issued a positive outlook statement.

Strong client demand

Activity levels and client demand had been strong. Meanwhile, recruitment market conditions had been favourable. Key to the firm’s growth prospects is the way it aims to attract high-calibre talent. However, the company did concede that economic uncertainty “continues to weigh on candidate flow”.

One of the biggest risks with a business like this is that service delivery relies on qualified and talented people. The assets of the business – its people – could leave at any time. So it’s understandable the directors put so much emphasis on recruitment.

Looking ahead, City analysts have pencilled in a modest advance in earnings for this year of just over 4%. Set against that expectation, the anticipated earnings multiple is running at just over 20.

That’s a fair valuation when considered alongside the multi-year CAGR for earnings. But the rating compares to the FTSE AIM All Share index multiple at just under 12.

So there’s some risk in the valuation for shareholders. If Keystone Law misses its earnings estimates in future, that rating could contract, taking the share price lower.

Nevertheless, I can see why Ensor likes the stock for his fund. I’m now keen to dig in with further research with a view to buying some of the shares for a long-term hold.

The post Why this fund manager expects rapid growth from UK small-cap stocks appeared first on The Twelfth Magpie.

Like the sound of this? Here are three top UK dividend shares to consider buying today.

A rock-solid business

One stock that strikes me as a good pick for a second income right now is Tesco (LSE: TSCO).

It’s currently sporting a forward-looking dividend yield of about 4.5%, meaning a £5,000 investment could potentially generate annual income of around £225.

What I like about Tesco is that it’s a ‘defensive’ business. So, while it does face risks (like competition from discount retailers), its profits and dividends are unlikely to suddenly evaporate.

I also like the fact that the company has a fair bit of momentum right now. In October, the FTSE 100 company raised its profit outlook for the full year.

Tesco shares currently trade at a reasonable valuation. At present, the forward-looking P/E ratio is about 11.

At that multiple, I see the potential for share price gains too.

It’s worth noting that analysts at HSBC have a price target of 340p.

A renewable energy play

Next up is Renewables Infrastructure Group (LSE: TRIG).

This is a listed investment company that owns a broad portfolio of wind and solar farms across the UK and Europe, and tends to have inflation-linked contracts. Its aim is to provide steady, sustainable returns to investors through dividends.

For 2024, analysts expect Renewables Infrastructure Group to pay out 7.37p per share in dividends to investors (a yield of about 6.7% currently). That means that a £5,000 investment at the current share price could generate annual income of about £340.

That’s assuming the forecast is accurate. Sometimes, analysts’ forecasts can be a little off the mark.

Now, given the global shift to renewable energy, I think this company has a bright future ahead.

However, there are some stock-specific risks to be aware of here. For example, poor weather conditions could result in lower energy generation and cash flows/dividends at some stage in the future.

A small company paying big dividends

Finally, the third stock I want to highlight is Keystone Law (LSE: KEYS). This is a small-cap company in the legal space that operates a scalable platform business model.

It’s currently forecast to pay out 20.4p per share in dividends next financial year (a yield of about 4.4%), meaning a £5k investment could potentially generate annual income of about £220.

Investors often overlook the small-cap space when investing for passive income. However, this can be a mistake as there are plenty of smaller companies that are rewarding their investors with big cash payouts.

Keystone Law is a great example here. Just a few months ago, it announced a ‘special dividend’ of 12.5p per share alongside its regular H1 dividend of 5.8p per share (which itself was up 12% year on year).

The company noted at the time that it had strong momentum in its business.

One risk here is that the company is vulnerable to an economic slowdown. Only on Friday, in fact, did we see worse-than-expected retail data showing the UK economy was failing to grow in October.

I think the key is to take a long-term view, and focus on the dividends.

The post Like passive income? Here are 3 top dividend shares to consider appeared first on The Twelfth Magpie.

History shows, however, that at some stage in the not-too-distant future, sentiment is likely to improve, pushing up share prices across the board. With that in mind, here’s a look at two British growth shares that could potentially surge in the next bull market.

A scalable business

First up is Keystone Law (LSE: KEYS). It’s a law firm that operates a very scalable platform model.

This stock has been out of favour for a while now. It seems recession fears (legal activity is positively correlated to economic growth) and recruitment challenges have spooked investors. And these are certainly valid risks here.

A bull market could dramatically change sentiment, however, as the business is still performing quite well.

Recently, the company told investors that the favourable market conditions reported in H1 2023 continued in H2, resulting in another strong performance.

It added that it expected both revenue and adjusted profit before tax for the year ended 31 January to be “marginally ahead” of market expectations.

“I am confident that as the recruitment market stabilises we will see further impetus to our future growth,” commented Founder and CEO James Knight.

At present, Keystone Law shares sport a forward-looking price-to-earnings (P/E) of around 21. I see considerable value at that multiple, given how scalable this company is.

A yield of around 3% adds weight to the investment case.

Strong dividend growth

A second growth stock that I think could perform well when sentiment towards UK shares improves is Gamma Communications (LSE: GAMA). It’s a technology company that provides communications solutions to businesses across the UK and Europe.

This is another stock that has been out of favour for a while now. For the best part of a year, the company’s share price has gone sideways.

Yet Gamma continues to make progress.

For 2022, the company generated revenue of £484.6m and adjusted earnings per share of 71.8p, up 8% and 12%, respectively.

And the company raised its dividend for the year by a healthy 14% to 15p per share. This suggests to me that it’s confident about the future.

Looking ahead, management noted that the board is positive about the outlook for the group in 2023 and beyond.

“We believe that more and more businesses of all sizes are seeing the advantages of Unified Communication as a Service (UCaaS) and we expect to see continuing growth,” said Chair Richard Last.

These results, and the fact that the stock trades on a P/E ratio of just 15 right now, lead me to believe that this stock could jump when we next see a bull market.

It’s worth noting that a risk here is growth in Europe. Last year, it was underwhelming.

Overall though, I like the risk/reward set-up at current levels.

The post 2 UK growth stocks that could surge in the next bull market appeared first on The Twelfth Magpie.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Accrol Group Holdings

What it does: Accrol produces toilet rolls, kitchen towels, and facial tissue products for major grocery retailers.

By Charlie Carman. Tissue manufacturer Accrol Group Holdings (LSE: ACRL) doesn’t exactly operate in a sexy sector on the face of it. However, a look at the firm’s finances makes this stock more glamorous than it might first appear.

Revenue growth exploded by 64% in the most recent half-year results. In addition, the business now has 21.5% of the market share based on sales volume. That’s a huge increase from the 5.6% share it had in 2017.

The Blackburn-based company has increased volumes across all product categories, but facial tissues (+50.2%) and wet wipes (+120%) have seen particularly impressive growth. Accrol is targeting further expansion opportunities in these areas.

One risk facing the firm is the 41% increase in net debt to £30.5m. However, the business has issued guidance that it’s already trading marginally ahead of expectations for FY23. If it can continue to deliver rapid growth, I think Accrol’s future looks bright.

Charlie Carman has no positions in Accrol Group Holdings.

Begbies Traynor Group 

What it does: Begbies Traynor provides professional services in fields including insolvency, asset sales and funding. 

By Royston Wild. Rising economic optimism has fuelled significant stock market gains in recent weeks. But improved investor confidence has seen many counter-cyclical shares plummet in value. 

Insolvency specialist Begbies Traynor Group (LSE:BEG) is one UK small-cap stock that’s sank since the start of 2023. In fact it’s down a hefty 10%. I believe that this reversal presents an excellent dip-buying opportunity. 

The number of companies in severe financial distress has ballooned and is tipped to keep rising. Last week business advisory firm FRP Advisory predicted that business volumes in the restructuring and administration market will grow this year.  

It said too that enquiries for its restructuring services “continues to rise.” I therefore think that heavy recent selling of Begbies Traynor shares is premature. 

Persistent inflation and increased borrowing costs are playing havoc with company balance sheets. With economists tipping a recession lasting well into 2024 conditions are likely to remain extremely difficult, too. And so businesses like Begbies Traynor could continue to generate robust earnings.

Royston Wild does not own shares in Begbies Traynor or FRP Advisory. 

Begbies Traynor

What it does: Begbies Traynor Group plc is a business recovery, financial advisory and property services consultancy company

By Paul Summers: Shares in insolvency specialist Begbies Traynor (LSE: BEG) have done fairly well over the last 12 months. That’s not really surprising considering the bleak forecasts that have been hitting the headlines.

I think there could be more gains to come. Back in December, the company said that it expected “continued growth” due to “higher levels of enquiries and increasing economic headwinds”.

Sure, the Bank of England now believes a UK recession will now be shorter and less severe than first thought. However, I reckon a lot of small businesses could still be in deep trouble. A Q3 update from Begbies is due before the end of the month.

The stock isn’t expensive either. I can grab a slice for 13 times forecast earnings. There’s a near-3% yield in the offing too.  

Having once been a holder, I’m tempted to buy back in.

Paul Summers does not own shares in Begbies Traynor.

Creo Medical

What it does: Creo Medical is a medical devices company that manufactures electrosurgical products used in endoscopic surgery.

By Ben McPoland. It’s been a stomach-churning 12 months for investors in Creo Medical (LSE: CREO) shares. After sliding 80%, the small-cap stock has shot up 65% in the last month. That’s due to a £28.5m fund raise. It may raise more money shortly via another share placement, which risks volatility in the stock.

However, the loss-making firm expects this cash will see it through to profitability, as adoption of its minimally-invasive surgical technology picks up worldwide. Its leading product is called Speedboat, which is a device attached to an endoscope. These are traditionally only used to diagnose diseases, not treat them. But Creo’s products can dissect, resect, coagulate and inject, all in a single device.

Last year, it signed a multi-year deal with med-tech giant Intuitive Surgical to optimise certain Creo products to be compatible with Intuitive’s robotic technology. This is a huge endorsement of Creo’s technology, and any future licensing revenue should be very high-margin.

At 31p a share, the long-term upside could be significant.

Ben McPoland owns shares in Creo Medical.

DX Group

What it does: DX Group is a delivery company that specialises in IDW (irregular dimensions and weight) packages and parcels.

By John Fieldsend. DX Group (LSE:DX.), with a current market cap of £169m, trades at around 28p. That’s a share price that is down around 78% from all-time highs. And despite the seemingly downward trend, the recent news has all been positive. 

Revenue has been increasing, with year-on-year growth in each of the last seven years taking total revenue from £287.9m in 2016 to £428.2m in 2022. Net earnings have been more of a problem as the company was unprofitable for some time, and this is likely the reason for the stuttering share price. However, the latest earnings showed a profit of £22.1m at an earnings-per-share of 2.9p.

Looking forward, the ongoing desertion of high streets in favour of online shopping is a strong tailwind for the company. A recession and the cost-of-living crisis may pose a problem, but overall, the company looks like a strong small-cap stock to me.

John Fieldsend does not own shares in DX Group.

Keystone Law

What it does: Keystone Law is an innovative UK legal firm that operates a scalable platform model.

By Edward Sheldon, CFA. Keystone Law’s (LSE: KEYS) share price has taken a big hit since the start of last year and I’m not convinced the fall is justified.

This is a company that has grown at an impressive rate in recent years as it has added lawyers to its platform. Between FY2019 and FY2022, revenues climbed more than 60%.

And recently, the small-cap stock advised that it delivered another strong performance for the six-month period ended 31 January, 2023.

Of course, the big risk here is a lengthy UK recession. This could have an impact on the company’s sales and profits as demand for legal services is correlated to economic growth.

After the large share price fall, however, I think the risk/reward proposition here is attractive. Currently, the stock’s price-to-earnings (P/E) ratio is in the low 20s. That seems very reasonable to me, given the company’s track record and long-term growth potential.

Edward Sheldon owns shares in Keystone Law.

Sanderson Design

What it does: Sanderson Design is a UK-based luxury interior furnishings company, specialising in wallpaper, fabrics and paints.

By Harshil Patel. Some of the best small-cap stocks often have turnaround potential. One such share that I’d buy in March is Sanderson Design (LSE:SDG). Just a few years ago, a new CEO arrived and set out a clear strategy to drive sales.

She streamlined the number of products and made the business much more efficient. The next step is to leverage Sanderson’s designs to maximise their value.

In addition to its own manufacturing capabilities, it also offers a licencing model. This part of the business is highly profitable.

The turnaround seems to be making progress. Its high-margin licencing business performed very strongly last year, with sales up by 23% to £6.4m.

It also recently announced a major licencing agreement for its Clarke & Clarke brand with FTSE 100 retailer Next. That sounds encouraging to me.

Sanderson is cash-generative and has a solid balance sheet. With a price-to-earnings ratio of just 9, I’d say it’s too cheap to ignore.

Harshil Patel does not own shares in Sanderson Design.

Superdry

What it does: Superdry is a clothing brand with both retail and wholesale operations, combining vintage Americana styling with Japanese graphic design elements.

By Christopher Ruane. The founder and chief executive of Superdry (LSE: SDRY) has been topping up his stake lately. The shares have risks but look like a bargain to me, and I continue to hold them in my own portfolio.

The risks were highlighted by the company’s move last year to refinance some debt with high-interest loans. That suggests the retailer may have struggled to persuade mainstream lenders about its business prospects. Without the right financing in place, the seasonal cash flows common in the retail sector can kill a company.

But with a price-to-earnings ratio in the mid single digits, I see that risk as already priced in. Superdry has an iconic brand and revenues are growing, albeit modestly. I think the company could continue to grow in 2023 and see its current share price as cheap for such a well-known apparel brand. Apparently the firm’s boss feels the same way, given his recent purchase.

Christopher Ruane owns shares in Superdry.

UPGS Global Sourcing

What it does: UPGS owns and distributes a wide range of consumer products under homeware brands such as Salter and Beldray.

By Roland Head. UPGS Global Sourcing (LSE: UPGS) may not be a familiar name, but the small-cap stock’s products are a common sight in UK homes.

Growth was strong during the pandemic but slowed last year, as retailers cleared overstocking. However, UPGS’s outsourced production model means that the company doesn’t have too much cash tied up in stock.

Management are hoping to emulate the group’s UK success in other European markets, including Germany. Progress so far looks promising to me, but I can also see a risk that the group’s brand-driven UK strategy might not work so well in less familiar markets.

This business has generated attractive returns in the past, and February’s trading update confirmed results for the year to 31 July should be in line with forecasts. That prices the stock on nine time forecast earnings, with a 5% dividend yield.

I see UPGS as a decent buy at this level.

Roland Head does not own shares in UPGS Global Sourcing.

The post Best British small-cap stocks to buy for March appeared first on The Twelfth Magpie.

Here, I’m going to highlight three AIM shares that appear to have a lot of potential. I think these stocks are worth a closer look right now.

Ergomed

First up is Ergomed (LSE: ERGO). It’s an under-the-radar company that provides specialised services to the pharmaceutical industry. Founded in 1997, it operates in over 100 countries worldwide, serving some of the pharma industry’s biggest players.

A recent trading update showed that this business is performing pretty well at present. For 2022, the company generated revenue of £145.3m, up 22.5% year on year.

Meanwhile, the group said it started 2023 with a positive outlook. It noted that its order book growth provides strong revenue visibility.

We are confident in our future as a leading global provider of specialist pharmaceutical services underpinned by market-leading technology, and look forward enthusiastically to the coming year.

Ergomed management

Recently, Ergomed’s share price has experienced a bit of a pullback. I think this has thrown up a potential buying opportunity. The shares still aren’t super cheap (the P/E ratio is about 25). However, the risk/reward proposition here is now quite attractive, in my view.

Keystone Law

Keystone Law (LSE: KEYS) is the next AIM stock I want to highlight. It’s an innovative law firm that operates a scalable platform model.

Keystone shares have taken a huge hit recently on the back of recession fears. It seems investors are worried that an economic downturn will reduce demand for the company’s services.

A recession is a risk here, of course. However, the recent share price fall seems excessive, to my mind.

In a trading update last month, the company said the favourable market conditions reported in H1 FY2023 continued through H2 (the six-month period to 31 January), as client demand remained “robust”, resulting in another “strong performance”.

The company added it expected both revenue and adjusted profit before tax for FY2023 to be marginally ahead of market expectations.

Keystone Law shares currently trade on a P/E ratio of about 24. I think that’s quite reasonable, given the company’s growth potential.

Calnex Solutions

Finally, check out Calnex Solutions (LSE: CLX). It provides testing and measurement services to the telecoms industry.

This is an AIM stock I’m very bullish on. In the years ahead, the rollout of 5G networks (and the emergence of new technologies such as self-driving cars) is going to create high demand for test and measurement services that help companies prove that new systems operate effectively and conform to rigorous international standards.

As a leader in this space, Calnex is well positioned for strong growth. It’s worth noting that for the six months to 30 September 2022, revenue was up 38% year on year.

Looking beyond the growth potential here, one thing I like about Calnex is the fact that the company is led by founder Tommy Cook. Research shows that founder-led businesses often turn out to be good long-term investments.

This is another stock that isn’t particularly cheap. Currently, the forward-looking P/E ratio is about 26. The valuation risk doesn’t put me off however. I see huge potential here.

The post 3 AIM shares that are worth a look right now appeared first on The Twelfth Magpie.

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Concurrent Technologies

What it does: Concurrent designs, builds, and supplies central processing unit boards, computer inter-connections, and computer systems to a variety of industries, mainly telecoms, aerospace, and defence.

By John Choong. On the back of a terrible year for chip manufacturers, Concurrent Technologies (LSE:CNC) shares could be about to ride the rebound with the rest of the industry. Its bigger peers like TSMC and AMD have signalled a bottom in the decline of chip demand, with growth expected from H2 onwards.

Concurrent’s latest trading update pretty much supports this sentiment. Management reported a record order book worth more than £31m. As such, the board is expecting to see significant revenue growth this year as it plans to increase its production capacity, and get its free cash flow back to positive levels.

Although its current and near-term forward multiples don’t exactly scream a bargain, it’s worth noting that those metrics only have a one-year time horizon. But because I plan to invest over a longer period, I’m looking beyond that. And given its earnings potential, buying the small-cap stock now could present quite a decent upside.

John Choong has no position in any of the shares mentioned.

EKF Diagnostics

What it does: EKF Diagnostics is a leading global medical manufacturer that specialises in point-of-care testing equipment and central laboratory devices.

By Edward Sheldon, CFA. There are a few reasons I’ve chosen EKF Diagnostics (LSE: EKF) here.

One is that the company is expected to generate solid revenue and profit growth this year. For 2023, City analysts expect revenues to climb 8% year on year and net profit to rise nearly 60% year on year.

Another reason is that the healthcare diagnostics industry is relatively recession-proof. EKF’s products are used in hospital and research laboratories, doctor’s offices, and blood banks in more than 100 countries. I’d expect demand for its products to remain stable if economic conditions deteriorate from here.

Of course, as a small-cap stock, EKF Diagnostics could be a volatile investment. I’d expect its share price to fluctuate a fair bit. However, with the stock currently trading well below its all-time highs, I like the risk/reward proposition on offer.

Edward Sheldon has no position in EKF Diagnostics

Everyman Media Group 

What it does: Everyman is the owner of the eponymous UK cinema chain. 

By G A Chester. The share price of Everyman Media Group (LSE: EMAN) is some 35% lower than this time last year. And its market value has halved from its level before the pandemic. 

Yet the company has just reported 2022 revenue over 20% higher than in the pre-pandemic year. Plus EBITDA (earnings before interest, tax, depreciation and amortisation) ahead of market expectations — a recovery taking it back to near its pre-pandemic level. 

This premium cinemas chain ended 2022 with 38 venues. Management told us its “cognisant of the difficult macroeconomic environment and consumer backdrop,” but said performance in the new financial year has been encouraging. And with plans to open a further five venues in 2023, and both the volume and quality of new film releases expected to increase this year, the directors said they “continue to have significant confidence in the future.” A risk here is if this confidence turns out to be over-optimistic, of course. 

G A Chester does not own shares in Everyman Media Group.

Fonix Mobile

What it does: Fonix is a unique consumer-friendly mobile payments business targetting the media, gaming, ticketing, and transport sectors.

By Zaven Boyrazian. As we move toward a cashless society, digital payment companies like Fonix Mobile (LSE:FNX) are riding on impressive tailwinds. The business provides a relatively unique mobile payment solution whereby small transactions can be completed, and the cost added to a user’s mobile phone bill. And it’s proving to be exceptionally popular.

Over 18 million people in the UK actively use Fonix’s payment solution, translating into a five-year average revenue growth rate of 25%, with operating margins steadily expanding.

Worryingly, the small-cap stock’s top 10 merchants are responsible for 85% of Fonix’s gross profits. Needless to say, that’s a fairly large client concentration risk.

But given that the firm hasn’t lost a single merchant from its platform in the last five years, these relationships seem pretty sticky. And given the potentially explosive long-term gains, opening a small position in my portfolio could prove highly lucrative in the long run despite the high risk.

Zaven Boyrazian does not own shares in Fonix Mobile.

hVIVO

What it does: hVIVO is a contract research organisation (CRO) that tests vaccines using human challenge clinical trials.

By Ben McPoland. The Covid pandemic has ushered in a wave of research and development spending focused on infectious and respiratory diseases. One company benefiting from this is hVIVO (LSE: HVO), a world leader in designing and running human challenge clinical trials.

Indeed, the firm conducted the world’s first such trial for the coronavirus back in 2021. These studies involve exposing healthy volunteers to the actual pathogen a vaccine is being tested for by biopharmaceutical companies. Its clients include four of the top 10 global biopharmas. 

Management expects record revenue of £50.6m for 2022, representing 30% growth year on year. That’s with minimum EBITDA margins of 17%. Its order book is bulging, up 65% year on year with contracted revenue reaching £76m by the end of December. 

Yet the small-cap stock is down 55% since reaching 38p back in April 2021. With a market cap of £113m or so, investors can expect share price volatility. 

Ben McPoland owns shares in hVIVO.

Income and Growth VCT

What it does: Income and Growth is a venture capital trust that invests in a range of early stage companies.

By Christopher Ruane. Over the past year, shares in Income and Growth (LSE: VCT) have fallen 17%. I think that makes now an attractive moment for a long-term investor like me to buy the shares, which I would do if I had spare cash to invest.

The trust aims to pay an annual dividend of at least 6p per share. Although dividends are never guaranteed, last year it exceeded the target with an 8p per share payout. That means the shares currently yield over 10%. I find that very attractive, while recognising that the dividend may jump around quite a bit from year to year.

Investing in growing companies at an early stage has helped it fund lucrative shareholder distributions. If the trust’s holdings suffer in the recession, that might hurt earnings. But over the long term, I think exposure to growth stories could help the trust profit – and hopefully pay large dividends.

Christopher Ruane does not own shares in Income & Growth.

Keystone Law Group

What it does: Keystone is a full-service law firm with 400+ lawyers that embraces technology and modern working practices.

By Charlie Carman. Keystone Law Group (LSE:KEYS) is an AIM-listed company, whereas the vast majority of law firms are limited liability partnerships. Accordingly, Keystone offers a rare opportunity for investors to gain legal industry exposure in their portfolios.

The half-year 2023 interim results make for positive reading. The firm delivered revenue of £36.8m, which represents a 9.3% increase over H1 2022.

In addition, operating cash conversion of 101% and the absence of debt bodes well for the dividend. The last interim dividend was 5.2p per share.

The firm also continues to attract talent as experienced lawyers increasingly look for flexible career opportunities beyond the traditional law firm model.

Granted, there’s a risk client legal expenditure could come under pressure in an economic downturn. Nonetheless, Keystone shares have halved in value over the past 12 months, and I’d like to enter a position while I can still buy the shares in this small-cap stock at a bargain price.

Charlie Carman does not own shares in Keystone Law Group. 

Ramsdens Holdings

What it does: Middlesbrough-based Ramsdens Holdings is a diversified financial services provider and retailer.

By Paul Summers. In contrast to most UK stocks, Ramsdens Holdings (LSE: RFX) enjoyed a very good 2022. As I type, the share price is up 25% over the last 12 months. There might be more gains ahead.

Recent trading has been encouraging. Jewellery retail gross profit rose 15% in the three months to December. The pawnbroking book also saw further growth. That’s not surprising in the current climate.

There’s a dividend stream from this small-cap stock, too. Right now, Ramsdens is down to yield 4.4%. This payout is also likely to be easily covered by profit. So, there’s a high probability of it being paid. 

That said, no investment is a sure thing. Any chinks of light in the economy could see existing holders take profit and move on. 

Then again, the valuation of 10 times earnings isn’t exactly excessive. So, as a possible hedge against further economic pain, I reckon Ramsdens remains a tempting option.

Paul Summers has no position in Ramsdens Holdings.

UP Global Sourcing Holdings 

What it does: UP develops and sells branded kitchen and laundry products. Its brands include household names such as Salter, Beldray and Russell Hobbs. 

By Harshil Patel. UP Global Sourcing Holdings (LSE:UPGS) sells its homeware products via supermarkets, discount retailers and online. Its business is growing. Led by a competent management team, it has managed to grow profits steadily over several years. 

Looking forward, future growth is likely to come from overseas. International sales grew faster than UK sales last year. And there is potential to expand across Europe.  

Most of its sales come from a handful of its brands. As such, UP is likely to keep its focus on them. That should bring additional benefits by building scale and keeping development costs low. 

Bear in mind that it is currently reliant on its operations in China, and any post-Covid disruption could be an area to watch.  

That said, if I had some spare cash, I’d certainly buy this small-cap stock. It’s a profitable business with a resilient balance sheet. With a price to earnings ratio of just 10, and a dividend yield of 5%, the shares look cheap to me.  

Harshil Patel does not own shares in UP Global Sourcing Holdings. 

The post Best British small-cap stocks to buy for February appeared first on The Twelfth Magpie.