The company, which was founded in 1993, was floated on AIM in July last year at 161p a share and I was impressed by its half-year results in November, rating the stock a ‘buy’. I maintain my stance on the back of today’s full-year numbers. I reckon this specialist in occasionwear and dressy casualwear has every prospect of continuing to outperform the FTSE 100.

A fast-growing business

Today’s results showed 30% year-on-year growth in group revenue to £116.4m. UK stores and concessions increased 12% to £64.4m, online rose a spectacular 158% to £30.6m and international sales grew 32% to £21.2m.

The omnichannel strategy is clearly working well and the company is investing for growth across its business. It currently operates 71 stores in the UK and the board believes that there’s potential for a further 40 to 50 stores in the medium-to-long term. International expansion represents a significant opportunity, with the company using multiple routes to international markets, including online, as well as standalone stores, concessions, and franchise and wholesale partners.

Attractive valuation

As the company is investing for growth, profit is not increasing as fast as revenue at this stage. It reported a 20% rise in underlying profit before tax to £9.8m and a 22% increase in underlying earnings per share (EPS) to 6.48p, a little ahead of City expectations of 6.3p. Net cash on the balance sheet at the year-end was £9.2m and the board declared a small maiden dividend of 0.8p.

Ahead of today’s results, analysts were forecasting EPS of 8.05p for the company’s financial year to March 2019. The valuation on this basis is attractive, in my view. The price-to-earnings (P/E) ratio is 21.2 and with EPS growth of 24.2%, the price-to-earnings growth (PEG) ratio is 0.88, which is on the good value side of the PEG fair value marker of one. A forecast dividend of 1.73p gives a prospective yield of just over 1%, as the board pursues a progressive dividend policy.

Good-value proposition

AIM-listed personal goods firm Swallowfield (LSE: SWL) has been around since 1876. Its market capitalisation is £56m at a current share price of 325p. The shares have lagged the FTSE 100 so far this year, having declined 5.1%, but have more than tripled over the last three years. This has been due to new management in 2014 being successful in its aim of exceeding Swallowfield’s historical profit norms and shareholder returns.

The company formulates and manufactures products for many of the world’s leading personal care and beauty brands. It also has a growing owned-brands business, which represented 24% of last year’s group revenue of £74.3m.

For the current year ending 30 June, we’re looking at a forecast rise in revenue to £76.2m and a 33.3% increase in EPS to 23.6p. This gives a P/E of 13.8 and a PEG of 0.41. Add a forecast 6.15p dividend, giving a handy yield of 1.9%, and I see a good-value proposition here and rate the stock a ‘buy’.

With this in mind, here are two market minnows I’ve recently added to my own watchlist.

Strong sales growth

Holders of personal care and beauty products supplier Swallowfield (LSE: SWL) endured a roller coaster 2017 as the company’s shares bounced up and down within the 300p to 400p range — a decent illustration of just how volatile market minnows can be over a short period of time. Nevertheless, I think the company could prove to be a great medium-to-long term pick if today’s interim results are anything to go by.

In the 28 weeks to 6 January, underlying operating profit rose 11% to £3.4m. Revenue came in at £40m with “strong sales growth momentum” seen in the company’s portfolio of owned brands (which now contribute 31% of total sales). It was supported by decent trading over Christmas, “further retail distribution gains” in the UK and Europe and new product launches. While starting from a low base, online sales also grew “significantly“, according to the company.

Even though an 18% rise in the interim dividend and confirmation that PZ Cussons Brand Director Tim Perman will take over CEO duties in July are encouraging developments, it’s Swallowfield’s growth potential that most attracts me to the stock. No slouch when it comes to acquisitions, the company backed up today’s numbers with the announcement that it had purchased the men’s grooming brand Fish for a total of £3m. With net sales of £1.7m and EBITDA to the tune of £400,000 last year, this seems like a good deal.

Priced at 13 times forward earnings, shares in Swallowfield aren’t particularly dear for what appears to be a well-run business. A forecast PEG ratio of just under 1 also suggests that investors should expect positive share price momentum going forward.

Record revenue

Another small-cap that’s caught my attention recently is Filta Group (LSE: FLTA).

The company specialises in cleaning fryers used in kitchens in a huge number of locations (including hospitals, restaurants and schools) and recycling the oil it collects. While not the most exciting line of work, the £49m cap is clearly doing something right based on this month’s trading update for the previous financial year (ending 31 December).

Revenue rose “over 30%” in 2017 to stand in excess of £13.25m — a record for the company. Strong organic growth in the UK was attributed to excellent trading at the firm’s FiltaSeal business, which installs refrigeration seals on site. Similar performance across the pond was explained by the increase in the number of franchises and Mobile Filtration Units in operation in the market.

Like Swallowfield, Filta seems set for a period of sustained growth. Indeed, having acquired Grease Management Ltd in August last year, CEO Jason Sayers has stated that Filta is committed to expanding “through both acquisitive and organic means over the short, medium and long-term“.

On a forecast price-to-earnings (P/E) ratio of 25 for 2018, there’s already a lot of positive news priced-in. That said, with the company now gearing up to grow its fryer management franchise business throughout Europe, I think the stock could still prove rewarding for new investors.

Even the world’s mightiest companies have to start somewhere, and for those investors who manage to get in at the beginning, the returns can be enormous. 

The next Unilever 

Over the past three years, Swallowfield (LSE: SWL) has grown from a tiny micro-cap with huge ambitions, to one of the hottest small-caps on the AIM. 

The company specialises in the production and manufacture of quality personal care and beauty products for leading brands, and business is booming. Thanks to the bolt-on acquisition of Brand Architekts last year, in the year to June 24, revenue expanded 36% to £74m, according to the firm’s full-year results released today. Organic growth, excluding Brand Architekts revenue, rose 8% year-on-year. 

Revenue growth, coupled with higher sales of the company’s own brand products (now 24% of revenues with a higher average margin) helped profit expand 180% year-on-year to £5.6m and adjusted earnings per share lept 40% to 17.7p. Strong cash generation throughout the year helped reduce net debt from £4.3m to £3.6m, including acquisition costs. These impressive trading figures have inspired management to hike the firm’s full-year dividend payout by 68% to 5.2p per share. 

Shares in Swallowfield have added 15% in early deals on the back of today’s results release, and I believe that this is just the beginning of the firm’s growth. 

Gaining size

Since the beginning of 2014, shares in Swallowfield have added 260% as the company’s earnings per share have risen 350% from 3.9p to 17.7p and revenues have expanded by 50%. During this period, management has been working hard to re-ignite growth after several years of stagnation and losses, and it looks as if these efforts have paid off.

In my opinion, now that Swallowfield has woken up, and shown what it is capable of over the past year, the sky is the limit for the company.

Growth through acquisitions 

Swallowfield agreed to buy Brand Architekts for £11m, with a mixture of cash, debt and a placing to raise £8.6m in 2016, following the acquisition of The Real Shaving Company for £1.2m in 2015.

These two deals have boosted growth, and Swallowfield’s strong cash generation and shareholder support indicate that management can continue to roll up other smaller businesses into the group to drive growth in the years ahead. As the group grows through acquisitions, it should be able to take on bigger targets and use its size to extract cost savings and boost margins. 

Still, even without completing any further acquisitions, City analysts are already expecting big things. Analysts have pencilled in earnings per share growth of 36% for fiscal 2018 as near-term costs from the Brand Architekts acquisition fall away. Based on this estimate, the shares trade at a forward P/E of 12.2, which in my view is hardly demanding considering the company’s growth. 

So overall, Swallowfield looks to me to be one of the AIM’s most attractive growth stocks. 

Trading well

The firm delivers commercial law and complementary professional services and arrived on the stock market on 8 June 2015. That’s a positive for me because newly listed firms tend to be well financed and are often run by keen directors out to make their mark. The fact that Gateley was the first UK law firm ever to list on the stock market enhances the argument, I reckon.

The figures are good for the year’s trading to 30 April. Revenue pushed up 15.7% compared to the year before, basic earnings per share (EPS) lifted 15.3%, and the directors crowned the year’s achievements with a 17% hike in the total annual dividend.

Organic and acquisitive growth

Strong cash generation helped the firm execute its second acquisition during September 2016 and the integration is going well. Organic and acquisitive growth seems prominent on the agenda, supported by a business that is “well balanced and resilient,” said chief executive Michael Ward.

Following an “excellent” second half of trading, the operational momentum continued in the first two months of the current trading year. Mr Gateley put such progress down to the strength of the service offering, the depth of client relationships and growth in the firm’s teams of skilled professionals.

At today’s share price around 184p, you can pick the shares up on a forward price-to-earnings (P/E) rating of just over 17 for the year to April 2018, and the forward dividend yield runs at 3.9%. City analysts expect earnings to grow 13% that year and to cover the dividend payout almost 1.5 times. Although the valuation is quite full, I reckon the firm may have a bright future.

Defensive qualities

It’s hard for me to imagine conditions when legal services will not be in strong demand. so, I reckon Gateley’s business has a potentially robust defensive element to it. Meanwhile, Swallowfield (LSE: SWL) is another firm that strikes me as having defensive, evergreen cash-generating qualities.

The company develops, formulates, and supplies personal care and beauty products on a contract basis to major brand owners and also produces its own portfolio of brands. We last heard from the firm on 6 July when it told us how the trading year to June had turned out. Trading has been brisk and the directors expect to report revenues up 30% on a constant currency basis with the full-year results in September. Excluding acquisitions, the organic element of that growth should come in around 7%.

Emerging branded consumer goods business

Within the set-up, the firm’s own brands are performing well and driving some of that growth. In June 2016, the company enhanced its own-brand offering with the acquisition of The Brand Architekts Limited, which joins the stable to sit alongside organically developed brands such as Bagsy and MR. and the 2015 acquisition of The Real Shaving Company.

At a share price around 362p, the shares change hands on a forward P/E rating of 15 for the year to June 2018, and earnings are predicted to lift 16% that year, which seems like a fair valuation given what is known.

Growth potential

Reporting on Tuesday was residential developer Crest Nicholson (LSE: CRST). Its trading continues to be in line with expectations and the company is on target to deliver growth in unit sales. It is also on track to post a 10% rise in revenues for the current financial year. This shows that while house prices may be coming under a degree of pressure, the overall outlook for the housing market remains generally positive.

A key reason for this is the strong demand and wide availability of mortgages to first-time buyers. The mortgage market is highly competitive and this should help housebuilders such as Crest Nicholson perform relatively well even if house prices edge lower. In fact, the company is expected to report a rise in its bottom line of 8% in the current year, followed by further growth of 11% next year.

Despite an above-average growth rate, Crest Nicholson trades on a price-to-earnings growth (PEG) ratio of only 0.7. This suggests that it offers growth at a very reasonable price, and that its risk/reward ratio remains compelling. Certainly, further volatility and challenges in the housing market cannot be ruled out. But with a wide margin of safety, Crest Nicholson could offer index-beating performance over the long run.

New opportunities

Also offering high growth potential at a low price is personal care and beauty specialist Swallowfield (LSE: SWL). It is a company in a period of intense change, with its recent acquisition of The Brand Architekts paving the way for a more successful and profitable future. The integration of the company is going as planned according to Swallowfield’s recent update. And with its manufacturing division performing well, its outlook remains highly positive.

In fact, Swallowfield is expected to record a rise in its bottom line of 17% in both of the next two financial years. This is more than twice the forecast growth rate of the wider index, and yet the company trades on a discount valuation. For example, it has a PEG ratio of only 0.8, which suggests the market has not yet fully factored-in its improving financial outlook.

With the original Swallowfield brands showing improving performance and the company seeking to deliver a cost optimisation programme, an upgrade to its outlook would not be surprising. As such, now could be the right time to buy it – even when the FTSE 100 and share prices in general continue to move towards record highs.

I believe Swallowfield (LSE: SWL) is one such business. With a market value of only £65m at the time of writing, the company is a tiddler. But it’s growing rapidly, and if growth continues at the rate it has done for the past three years, the firm will soon find itself in the mid-cap index. 

Indeed, over the past three years, Swallowfield has gone from strength to strength. For the fiscal year ending 30 June 2014, the company reported a pre-tax profit of only £140,000 and earnings per share of 3.9p. However, by 30 June 2016 earnings per share had jumped 350% to 17.7p. 

If City forecasts are to be believed the company has not finished growing yet. Analysts have pencilled-in earnings per share growth of 17% for this fiscal year and the same for the year ending 30 June 2018 taking EPS to 24.3p for growth of 530% in five years. 

Can the growth continue? 

The question is, how much longer can Swallowfield’s rise continue? Well, since 2014 management has been on a mission to strengthen the group and turn it into a market leader in the development, formulation, and supply of personal care and beauty products. There have been several parts to this strategy including 1) innovation, 2) product focus, 3) growth of own-brand sales and, 4) cost base optimisation. 

On all of these strategic targets, the group seems to be firing on all cylinders. During the first half of fiscal 2017, the company launched 35 new products. Meanwhile, original Swallowfield-owned brands showed combined revenue growth of 50% (from a relatively small base). To complement growth during 2016, Swallowfield acquired Brand Architekts, the owners of a portfolio of mid-premium beauty, body and haircare brands such as The Real Shaving Co and Dirty Works. 

To help drive down costs management has merged marketing agencies and invested in automation to increase production efficiency as well as lowering costs. Additionally, the company is growing its overseas presence, and international sales now account for 23% of total group sales. During the first half new distribution agreements were signed in Austria, the Netherlands, and Chile.

Growth worth paying a premium for?

It looks as if Swallowfield is making all the right moves to ensure that it can continue to grow in the years ahead and I’m optimistic about the company’s outlook. The one problem is that shares in the firm currently look relatively expensive, considering that they have risen in value by nearly 150% over the past 12 months. At the time of writing, the shares trade at a forward P/E of 16.8, a valuation that does not leave much room for manoeuvre if growth begins to splutter. 

That being said, for the past three years the company has traded at an average P/E of 17.4, and including dividends, over this period the shares have produced an annualised return of 62%. So overall, if it’s a high-growth small-cap you’re looking for, Swallowfield could be the company for you.

System1 Group

System1 Group (LSE: SYS1) shares have been on fire in 2017, rising over 60% this year. Formerly known as BrainJuicer Group, System1 is a marketing and brand consultancy, with proprietary market research and advertising solutions based on the field of behavioural science. In layman’s terms the company focuses on understanding how people make decisions.

In the past, the research industry has assumed that humans make choices consciously and rationally. However according to System1, a growing body of evidence suggests these assumptions are wrong and that humans often make unconscious decisions that are influenced by their social, personal and environmental context. This is where System1 adds value – by helping its clients understand how decisions are made.

The £104m market cap company has enjoyed robust revenue and earnings growth over the last five years with revenue increasing 50% to £31.2m for the 12 months to the end of 2016, and earnings more than doubling in this time, from 15p to 32p. Cash generation has been impressive and the company generated a high return on equity of over 40% in 2016. System1 also has no debt.

The group is changing its year-end date from 31 December to 31 March, and earlier this week updated the market on trading for the 12 months to the end of March. Revenue grew 27% (13% on a constant currency basis) to approximately £33m, gross profit increased 29% (15% constant currency) to £27m, and management stated that the company has “continued to trade strongly since December 2016.”

With the shares up 60% year-to-date is it too late to buy? City analysts forecast earnings of 39.3p per share for FY2017, placing the company on a forward-looking P/E ratio of around 22.5 at the current share price. The group’s enterprise value (EV)-to-sales ratio is approximately 3.1. At those multiples, the stock isn’t cheap, but in my opinion it’s not overly expensive either given the growth record. I therefore wouldn’t be surprised to see the share price continue trending upwards.

Swallowfield

Another small-cap performing well in 2017 is £55m market cap, Swallowfield (LSE: SWL), rising 24% this year.  

Swallowfield is engaged in the development, formulation and supply of personal care and beauty products, and owns brands including The Real Shaving Company and MR Jamie Stevens.

Revenue increased 10% in FY2016, and adjusted earnings per share spiked 91% to 12.6p. Analysts anticipate sizeable earnings growth for 2017, with 20.7p per share forecast. That places the company on a forward-looking P/E ratio of 15.9, a reasonable valuation given the growth in earnings in recent years. An EV/sales ratio of 1.04 is also undemanding.

Although Swallowfield recently stated that the fall in sterling and global inflationary pressures could bring uncertainty in the months ahead, the company also stated that it remains “confident that our strong overall trading momentum will compensate in the current year.” As a result, I see no reason why the share price can’t continue to move upwards over time.

Outsourcing woes

I’ve been following outsourcing firm Interserve (LSE: IRV) for a while, not especially concerned about the firm’s debt and not overly worried about its dividend being cut as some had been fearing.

But then the blow was struck, and on 20 February Interserve raised the estimated costs of exiting its Energy for Waste business from £70 to £160m, and the share price crashed by 30%.

Full-year results for 2016 did not make for joyous reading. With average net debt of £391m and now expected to rise to around £450m in 2017, the firm suspended its final dividend — shareholders are only going to get the 8.1p paid at the interim stage instead of the 24.3p paid last year.

But it seems the bad news was already in the share price, and results day only saw a further fall of less than 1%. At 234p, I cant help thinking the sell-off has been overdone.

Although Interserve recorded a pre-tax loss, we saw a headline pre-tax profit figure down by a fairly modest 17% with headline EPS down 16%, and with revenue constant and an encouraging gross operating cash flow of £239m. In the words of chief executive Adrian Ringrose, it was a “mixed” year, and as long as it really is a one-off then this could be one of those ‘buy them when they’re down’ opportunities that we all hope for.

Forecasts will presumably be downgraded now, but we’re likely to be seeing forward P/E ratios of around five to six. I’ll cautiously look out for further news, but Interserve could be an oversold recovery bargain.

Growth from beauty

Swallowfield (LSE: SWL) is an AIM-listed company with a market cap of only around £60m, but it’s showing impressive growth characteristics. The company, in the personal care and beauty products business, has seen its shares double in value in a year to 341p today — although that does include a 5.4% drop on first-half results day.

But the results looked good across the board, with revenue up 44%, adjusted earnings per share up 176% year-on-year and the interim dividend more than doubled to 1.7p. Net debt did rise from £4.9m to £5.5m, but that did include additional funding for the acquisition of The Brand Architekts.

Chief executive Chris How told us the firm is “being rewarded with good growth and a steady stream of new business wins and contract renewals“, and expects accelerating growth.

On the fundamentals front, Swallowfield’s valuation looks attractive to me as a growth prospect, with a forecast 17% full-year EPS rise suggesting a P/E of 17 and a PEG of 1.0, dropping to 14.3 and 0.8 respectively based on 2018 prognostications.

Dividends look set to yield only around 1.5% and 1.8% this year and next, and while they’re not something to retire on just yet, they are very well covered by forecast earnings and look strongly progressive — and a welcome bonus for a company at this stage with attractive growth prospects.

Swallowfield is a small AIM stock, and that does bring its own share of risks — not the least of which is an AIM regulatory regime that many think is woefully inadequate. I’d need to dig further and would probably wait for full-year results, but I’m cautiously optimistic about Swallowfield’s prospects over the next few years.

Swallowfield

Swallowfield’s shares have moved higher today despite the company not releasing any significant news. The most recent update from the company was in September when it reported an upbeat set of results. Its sales moved over 10% higher following a year of major product launches for global brands, as well as significant product innovation and new business contract wins.

Looking ahead, Swallowfield’s growth prospects are very bright. It will make use of its expertise in areas such as aerosols and hot pour technology to boost volume and reputational value in delivering major products for household name global brands. Additional new business wins are also on the cards.

This is expected to produce a rise in earnings of 17% in the current financial year. Despite this strong growth outlook, Swallowfield continues to offer excellent value for money. For example, it trades on a price-to-earnings growth (PEG) ratio of 0.7. This shows that further gains could lie ahead.

Additionally, Swallowfield offers bright income prospects. Although it currently yields just 1.8%, dividends are covered four times by profit and this shows that rapid dividend increases may be on the horizon.

Sepura

Sepura’s shares are up after the company announced a major new contract win. Sepura has been selected by a large continental European public safety organisation to provide 19,000 SC20 series hand-portable radios. The contract builds on Sepura’s strength in the public safety market and shows that its current strategy is improving the company’s overall performance.

Sepura’s outlook is rather mixed. Although its profitability is due to fall significantly in the current year, next year is expected to represent a major step forward for the business. Sepura is forecast to increase its pre-tax profit from £0.4m in the current year to £11.6m in the next financial year. This step change in profitability has the potential to boost investor sentiment in Sepura and could cause its share price to rise.

Furthermore, Sepura offers excellent value for money. It trades on a forward price-to-earnings (P/E) ratio of just 6.1. This shows that even if its bottom line performance is lower than that currently anticipated by the market, Sepura has a sufficiently wide margin of safety to merit investment for the long term.

In terms of dividends, Sepura isn’t expected to make any shareholder payouts in either the current year or next year. However, for growth investors Sepura has real appeal and alongside Swallowfield, the gains made thus far today could continue over the coming months and years.

However, there is still considerable upside potential on offer for investors in Premier Oil. That’s because the price of oil could increase significantly in the long run as demand from the emerging world rises. Certainly, in the short run it could come under pressure but for long term investors, oil remains a very appealing industry in which to invest.

Moreover, Premier Oil still trades on a very appealing valuation even after its recent share price rise. For example, it has a price-to-book (P/B) ratio of 0.7, which indicates that capital gains are still very much on the cards in the long run and that now could be an excellent opportunity to buy.

Similarly, shares in Lonmin (LSE: LMI) have soared since the turn of the year. In fact, they have risen by a whopping 129% year-to-date, but there could be much more to come. That’s not only because there is scope for commodity prices to rise, but also because Lonmin seems to have a sound strategy through which to increase its earnings.

For example, it is seeking to reduce costs and become increasingly efficient. And with Lonmin having raised capital last year, it appears to have the financial firepower through which to deliver improved financial performance in the coming years. In fact, Lonmin is forecast to return to profitability in the next financial year, which has the potential to significantly improve investor sentiment in the stock.

Certainly, Lonmin’s forward price-to-earnings (P/E) ratio of 68 may seem to be excessively high, but when its P/B ratio of around 0.5 is factored in, there seems to be scope for further capital gains. While they may not be as impressive as those achieved in the last five months, they could still be well ahead of the wider index over the medium to long term.

Meanwhile, shares in Swallowfield (LSE: SWL) have risen by 24% today after it announced the acquisition of The Brand Architekts Limited, as well as a placing to raise £8.6m. The deal seems to be a logical one for the personal care and beauty product specialist, with Brand Architekts having the potential to bring critical mass to Swallowfield’s owned brand portfolio, as well as adding a proven management team. In addition, the deal looks set to be immediately earnings accretive and with the placing being oversubscribed, it seems popular among investors.

Clearly, after such a jump in share price many investors will feel that a pullback is on the cards. However, with Swallowfield trading on a price-to-earnings growth (PEG) ratio of just 0.3 prior to today’s update, it appears to still offer capital gain potential. And with today’s trading update being in-line with expectations, now could be a good time to buy Swallowfield.