Reporting season is all but over and like most occurrences some companies have performed well, exceeding expectations while others have reported numbers they would like to forget.

Below are two small companies currently priced under $1 that have impressed me with their 2016 FY reports and I would happily buy more today.

Paragon Care Ltd. (ASX: PGC)

Paragon Care is a provider of durable medical equipment to hospitals, medical centres and aged care facilities throughout Australia.

I have written about this company previously and it continues to impress me with its ability to increase profits and margins while consolidating recent acquisitions. Paragon’s latest report was no exception as you can see from the diagram below. While its numbers continue to impress, there has been some concerns raised that Paragon could suffer under proposed changes to the Medicare system. While I understand the concerns, I believe this fear is overblown with Paragon dealing directly with hospitals or centres rather than end consumers unlike a company such as Primary Health Care Limited (ASX:PRY) .

PGC 2016 Report

Source: Paragon Health Care Limited 2016FY report

Eureka Group Holdings Ltd (ASX: EGH)

Eureka Group Holdings Limited is a property asset manager of senior independent living communities in Australia. Eureka focuses on flexible guest and care services. Eureka currently owns 25 villages (or 1,296 units) with a total of 34 villages (or 2,035 units) under management.

EGH 2016 report

Source: Eureka Group Annual Report 2016

What I like about Eureka, besides a great report, is that it gives investors exposure to the aging population dynamic. While we may like to believe that we will be rolling in cash when we retire the facts are most Australians will not have enough saved for a lavish lifestyle and Eureka fills a growing need in this area. Eureka’s alliance with Blue Care, a leading not for profit organisation which aims to help older Australians to stay in their homes longer, is a smart one. Not only does it make their villages more appealing to older Australians but it indicates to me that the management understands their clientele well.

Foolish takeaway

The key to investing in small companies is to understand what the company does and how well it is serving its market. Both Paragon and Eureka are developing solid market positions and aiming to differentiate themselves by adding value to the customers’ experience over and above their competition.

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Motley Fool contributor Alan Edmunds owns shares of Eureka Group Holdings Limited and Paragon Care Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.