3 explosive growth shares to add to your watch list

So far this year the the Small Ordinaries (Index: ^AXSO) (ASX: XSO) has vastly outperformed its large cap rival the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Year-to-date the Small Ordinaries has gained almost 12%, compared to a gain of just over 2% from the S&P/ASX 200.

Personally I believe this shows that rather than solely focusing on traditional blue chips like Wesfarmers Ltd (ASX: WES) or Rio Tinto Limited (ASX: RIO), investors would be better off having a mixture of both blue chips and small cap shares in their portfolio.

These are three of my favourite small caps at the moment and definitely worthy of being added to your watch list today as far as I’m concerned.

DTI Group Ltd (ASX: DTI)

I believe this growing provider of integrated surveillance systems and fleet management solutions for the mass transit industry could have a bright future ahead of it. It recently reported a fantastic 140% increase in full year EBITDA to $3.6 million. Furthermore, the company just announced another key contract win. Following key contract wins over in the United States in recent months the company just revealed it has received an order from Alstom UK for the supply and installation of advanced CCTV surveillance systems for the Northern Line fleet on the London Underground. For the year ahead management advised prospective projects valued at $400 million are being pursued, compared to $200 million in the prior period.

Money3 Corporation Limited (ASX: MNY)

This growing small loans company recently announced an impressive 40% increase in full year revenue to $96 million and a 54% increase in net profit after tax to $20 million. Not only are profits up thanks largely to a change of direction from payday loans to auto lending, but its share price is as well. Year-to-date Money3’s share price has now risen a whopping 71%. But with management expecting net profit to grow 30% in FY 2017 and its shares changing hands at under 12x earnings, I believe there could still be more gains ahead for investors. Furthermore, it shares are expected to prove an estimated fully franked 4.1% dividend in FY 2017 according to CommSec.

RXP Services Ltd (ASX: RXP)

I must admit to being completely blown away by RXP Services’ full year results. Last year management provided FY 2016 sales guidance of $105 million, but ended up delivering incredible sales growth of 61% to $127.1 million. Improvements in its operating performance led the technology consulting services company to grow its EBITDA at an even greater pace of 71%. This meant full year underlying EBITDA came in at $18.2 million, with earnings per share a strong 7.6 cents. With its shares changing hands at just over 10x full year earnings and management forecasting sales growth of between 10% and 15% in both FY 2017 and FY 2018, RXP Services looks like a bargain buy in my opinion.

Finally, before making an investment in any of these shares I would highly recommend you take a look to see if you own either of these three wealth destroying shares. Each could be harming your portfolio right now and might be best swapped out if you ask me.

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

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