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2 small caps I’m excited by

The small cap end of the market is the most exciting part of the share market in my opinion.

It’s much easier for a business worth $50 million or $100 million to double in value compared to a $1 billion company.

Businesses with market capitalisations under $50 million may be too risky for most investors, I think these two shares could be just right:

National Veterinary Care Ltd (ASX: NVL)

National Veterinary Care is a fast-growing veterinary clinic business which is acquiring more clinics to grow.

Since the start of FY18 the business has grown its membership program called ‘Best For Pet’ by 29.2% to 13,704 members. This should make a good contribution to like-for-like sales growth for the year.

Since the start of the 2018 financial year it has grown its number of veterinary clinics from 53 to 60. Management have stated a loose goal of adding six clinics a year, but National Vet Care is growing quicker than that so far.

The business has a pleasing source of recurring revenue with two thirds of cats and three quarters of dogs visiting the vet each year.

Management expect statutory revenue growth to be around 25% in FY18, which means shareholders could be in for another bumper year.

National Vet Care is currently trading at 32x FY17’s earnings with a grossed-up dividend yield of 1.61%.

Clime Capital Limited (ASX: CAM)

Not only is it true that individual businesses are more likely to double in value when they’re smaller, it’s also easier for investment managers to work with smaller amounts of capital too.

Clime has a good history of paying a large and growing dividend over the last five years.

It invests in large caps like Ramsay Health Care Limited (ASX: RHC), medium caps like APN Outdoor Group Ltd (ASX: APO), small caps like Collins Foods Limited (ASX: CKF) and overseas shares like Priceline.com Inc.

I think the strategy to invest overseas is a good one and can only help boost investment returns over the long-term.

Clime is currently trading with a grossed-up dividend yield of 8%.

Foolish takeaway

Clime is clearly meant for dividend investors whilst National Vet Care should be a good growth stock with some dividend income thrown in over the coming years.

For even more exciting small caps, you should read this.

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Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO and Ramsay Health Care Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. 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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