Small-cap ASX shares were thoroughly demolished in the past 18 months, but there are now some green shoots showing up.
In a memo to clients, the team at QVG Capital Long Short Fund named three such stocks that have rocketed in recent times, which it is still backing for further gains:
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'High energy, entrepreneurial culture'
Mader Group Ltd (ASX: MAD) is an outsourcer for clients in the mining industry.
On the back of its latest numbers, the stock has soared an eye-opening 37% year to date.
"Their update showed revenues up 59% and was particularly pleasing given their March quarter is typically seasonally weak."
There are two reasons why the QVG analysts reckon Mader shares are set for further rises.
"Firstly, their customer is paying a discount to what an OEM would charge and only a small premium to what it would cost to do it 'in house'," read the memo.
"Considering the additional quality and flexibility this means good value for the customer."
The other tailwind is that, despite it now having a $1 billion market capitalisation, Mader has maintained a "high energy, entrepreneurial culture" first established by founder and chair Luke Mader.
"A highly incentivised and fast paced team is exactly what's required to expand successfully into new markets, as is Mader's strategy."
73% gain already this year
Dental centre network Pacific Smiles Group Ltd (ASX: PSQ) has seen its share price take off 28% over the past three weeks.
The QVG team noted that the company last month reaffirmed its earnings guidance.
"When people talk about stocks being cheap on a price-to-earnings or PE ratio, we remind ourselves this is only true if you use the right 'E'," read the memo.
"This update confirms that trading has improved and removes uncertainty around the 'E'."
Mader and Pacific Smiles have done pretty well in 2023, but they are not even in the same ballpark as Duratec Ltd (ASX: DUR).
The share price for the infrastructure maintenance contractor has gained a spectacular 73% since the start of the year.
The QVG note mentioned that in April the company boosted its earnings guidance by 12%.
"The rate of contract wins, the performance of their recent acquisition WPF and the absence of problem projects underpins Duratec's guidance and outlook."
The conservative nature of the projects Duratec's management takes on is a big bonus for QVG analysts.
"We are only aware of a few problem projects in their history, which is testament to their internal controls and the nature of the jobs and customers they're willing to take on."
