The small cap world is the most exciting out of the whole market in my opinion. The businesses are smaller, which gives them more room to grow.
Here are two of my favourite small cap ideas:
National Veterinary Care Ltd (ASX: NVL)
National Veterinary Care is one of the largest vet groups in Australia and New Zealand.
I really like the pet industry because it has quite defensive earnings due to people's willingness to spend on their pets. The pet industry is growing at a good rate thanks to a growing pet population, pet insurance and more pet services.
If National Vet Care can keep acquiring vets at a good price then the business should be onto a winner.
Management are clearly pleased with the progress and profitability of the business because a dividend was declared for the first time with its FY17 annual result.
National Vet Care is currently trading at 32x FY17's earnings with a fully franked dividend yield of 1.12%.
Class Ltd (ASX: CL1)
Class is a cloud accounting software provider for self-managed superannuation fund (SMSF) administrators.
The business is growing nicely every quarter thanks to the time-saving efficiencies and tools that it provides accountants. It can actually make SMSF administration profitable.
Class is also rolling out its Class Portfolio product, which is useful for entities like trusts that also have investment portfolios. Class estimate that the potential for this product could be at the same level as Class SMSF in the long run.
Class is currently trading at 47x FY17's earnings with a grossed-up dividend yield of 2.26%.
Foolish takeaway
Both businesses have exciting prospects but I think National Vet Care is trading at much better value because of how many vets it could still potentially acquire over the coming years.
