At the 4th Annual Australian Microcap Investment Conference this week, delegates heard from 24 small companies which are well placed to continue their growth path in the coming year. While in some cases the companies presenting remain very much 'out of the spotlight' with share prices to match; other companies presenting have already garnered significant investor interest.
Three such companies are WDS (ASX: WDS), Jumbo Interactive (ASX: JIN) and Quickstep Holdings (ASX: QHL). All three have seen their share prices rise between 35% and 40% over the past 12 months but based on their respective outlooks for revenue and earnings growth, their intrinsic value and their stock prices could be set to head even higher in the coming years.
1) WDS is a provider of services to the energy and underground coal mining sectors in Australia. The company has a market capitalisation of $125 million and is forecasting modest profit growth in financial year 2014. With good leverage to growth in the coal seam gas sector and a decision by the Board to move to quarterly dividend payments this is a stock worth putting on the watchlist.
2) Jumbo Interactive provides the software to purchase and play lotteries through the internet. Having built a leading position in Australia through the www.ozlotteries.com website, Jumbo is now setting its sights on foreign markets including the USA, Mexico and Germany. With a market capitalisation of just over $100 million and expectations that the company can capture a share of overseas online lottery revenue, there is the potential for the firm to recreate its success in Australia in these foreign markets.
3) Quickstep has developed and licensed an innovative manufacturing technology for the production of advanced composites for the aerospace and automotive markets. This has included securing a substantial contract to manufacture carbon fibre parts for the F35 Lightening fighter aircraft. With a market capitalisation of under $100 million and guidance by management that the company should be cash flow positive during financial year 2015, Quickstep is also deserving of a place of investors' watchlists.
Foolish takeaway
While being small does bring its own set of risks, it also can bring its own set of rewards. Investors who can carefully and diligently identify opportunities amongst microcap stocks stand to reap the rewards.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
