Rupert Hargreaves: Braemar Shipping Services 

Braemar Shipping Services (LSE: BMS) is an international shipbroker and shipping services provider. Its exposure to seaborne trade suggests the company is highly leveraged to the global economic recovery. Indeed, analysts reckon group earnings per share will increase 40% this fiscal year. 

Based on these projections, the stock looks cheap trading at a forward price-to-earnings (P/E) multiple of 12.8. 

The company’s valuation and growth potential are the reasons why I’d buy Braemar as a recovery stock in July. 

That said, if the economic recovery fails to live up to expectations, Braemar may be one of the first to suffer. As such, this investment has quite a high level of risk. 

Rupert Hargreaves does not own shares in Braemar Shipping Services.

Edward Sheldon: Keystone Law

My top small-cap stock is Keystone Law (LSE: KEYS). It’s an innovative, platform-based law firm that’s disrupting the UK legal industry. Last year, it won ‘Law Firm of the Year’ at The Lawyer Awards.  

Keystone has generated strong revenue and profit growth in recent years and I expect it to continue doing so in the years ahead. In the short term, the company should benefit as the UK reopens and economic activity picks up. In the long run, the expansion of its platform should drive top- and bottom-line growth higher.

One thing to be aware of is that the stock’s valuation is quite high. This adds risk to the investment case. Overall, however, I think the risk/reward proposition here is attractive.

Edward Sheldon owns shares in Keystone Law

Harshil Patel: Cake Box Holdings 

Cake Box Holdings (LSE:CBOX) is a specialist retailer of fresh cream cakes. It’s a franchise business and delivers most of its growth by opening new stores.  

So it’s encouraging to see a strong pipeline of new locations. It currently has 157 franchised stores and another 18-24 are expected this year. It’s also trialing several kiosks with a national supermarket. 

At some point, locations could become saturated and an optimum number of stores will be reached. That said, there’s currently plenty of eligible franchise applicants and potential locations to keep Cake Box growing.  

Overall, Cake Box is a quality company led by entrepreneurial management. I like that it offers double-digit earnings growth and strong margins. Its balance sheet looks strong and even offers a well-covered dividend. 

Harshil Patel owns shares in Cake Box Holdings.

Tom Rodgers: SCS

With home refurbishment markets booming, sofa manufacturer SCS Group (LSE:SCS) is my top small-cap stock for July 2021. The £116m market cap firm has produced operating profit growth of 30.6% in the last 12 months as sales and profits surge post-lockdown. Dividends are expected to return in force, as high as 12p per share for 2022, offering substantial future income even after a 40% rise in the share price in the year to date. A forward P/E of 11 times earnings is cheap and I see more upside for July and beyond.

Tom has no position in SCS at time of writing.

G A Chester: B.P. Marsh & Partners 

Founded in 1990, and still founder-led, B.P. Marsh & Partners (LSE: BPM) is a specialist private equity investor in early stage financial services businesses. There’s higher risk with fledgling businesses, but the company has an impressive long-term record of growing its net asset value (NAV). It reported another year of growth last month, with NAV up £13m to £150m. 

The stock is currently priced with a market capitalisation around £120m. In other words, at a 20% discount to NAV. Given the company’s track record of delivering strong shareholder returns (including dividends), and the growth prospects of its investee businesses, I think there’s exceptional value on offer here. 

G A Chester has no position in B.P. Marsh & Partners.

Zaven Boyrazian: Bioventix 

Bioventix (LSE:BVXP) is a biotech company that manufactures specialised antibodies for blood testing. It’s a niche product. But remains an essential ingredient for diagnosing almost every type of disease – including Covid-19.

The firm generates revenue from direct sales to in-vitro diagnostic companies and royalties from any product developed using its propriety material. The latter has yet to evolve into a substantial source of income. But it does provide the facility for a recurring revenue stream in the future.

Bioventix operates in a highly regulated industry. This undoubtedly adds some operational risks. Suppose the firm or any of its royalty-generating customers fail to comply with regulations. In that case, its reputation and income could be compromised. But personally, I think the potential reward is worth the risk.

Zaven Boyrazian does not own shares in Bioventix.

Roland Head: Vertu Motors

Car dealership group Vertu Motors (LSE: VTU) is one of the UK’s largest motor retailers, with brands including Bristol Street Motors. Vertu says that demand for used cars is “exceptional” at the moment. The latest update from the company revealed strong trading and triggered an upgrade to profit forecasts.

The main risk flagged by the company is that the global chip shortage will cause delays to new car deliveries. However, Vertu’s share price is covered by the value of the group’s property portfolio, and the business currently trades on just seven times forecast earnings. Brokers are also forecasting a useful 3.6% dividend yield this year.

In my view, Vertu looks like a good, cheap, small-cap stock. I recently added the shares to my portfolio.

Roland Head owns shares of Vertu Motors.

Paul Summers: SDI Group

Having multi-bagged over the last year, shares in shares in scientific product maker SDI Group (LSE: SCI) look expensive. However, I suspect they could eventually be worth a lot more thanks to an acquisition-focused growth strategy similar to that of FTSE 100 top stock Halma.

There could even be more upside in July. The company stated in May that it would exceed previous estimates on FY21 revenue and adjusted pre-tax profit (given in February). I wonder if trading since then, combined with the lifting of restrictions, will lead management to also upgrade its FY22 guidance later this month.

Paul Summers has no position in SDI Group or Halma.

Christopher Ruane: M&C Saatchi

Things have been looking up for the previously troubled advertising small-cap stock M&C Saatchi (LSE: SAA).

The shares are up 156% already over the past year. For a company whose survival was in question at one point, that is impressive. But I see further possible gains ahead. The advertising market generally is buoyant. M&C Saatchi is poised to benefit from that. The company recently lifted its forecast for the year.

The company’s reputation remains tarnished, though, which could act as a dampener on growth.

Christopher Ruane does not own shares in M&C Saatchi.

Royston Wild: Begbies Traynor 

The British government’s furlough schemes have helped keep a lid on insolvency rates during the pandemic. But with these financial support programmes set to end, I think now could be a good time to invest in Begbies Traynor Group (LSE: BEG). 

Indeed, buying this UK share before full-year results are released on Tuesday 20 July could be a very good idea. Despite a depressed insolvency market Begbies Traynor said in May that full-year revenues would grow ahead of market expectations following a strong fourth-quarter performance. News that trading has remained robust in the new financial period (to April 2022) could help lift the small cap again following recent share price weakness.

At current prices Begbies Traynor trades on a rock-bottom forward price-to-earnings (PEG) ratio of 0.4. This provides plenty of scope for a fresh move higher.

Royston Wild does not own shares in Begbies Traynor. 

Niche manager

This company has carved out a niche for itself in the asset management business over the past 20 years managing sustainable funds, a rapidly expanding part of the market.

At the end of the first quarter, the company reported an increase in assets under management of 21% year-on-year to £12.7bn, with net inflows for the financial year to the end of March totalling £1.8bn. Considering the fact that the rest of the active asset management industry is struggling to attract assets away from passive fund managers such as Vanguard, these impressive fund flows stand testament to Liontrust’s investment proposition.

As the business has expanded, investors have been well rewarded. The stock has risen five-fold since 2012 as net profit has jumped from a loss of £4m to profit of £25m (estimated for 2019). At the same time, Liontrust’s per share dividend has risen from 1p to 21p and analysts are expecting this trend to continue, with dividend growth of 15% pencilled in for 2019, and 11% for 2020, giving the stock a 2020 dividend yield of 4%.

Supply vs demand

Another firm that I think you should consider for your income portfolio today is homebuilder Bellway (LSE: BWY). With a dividend yield of 5% at the time of writing, this company immediately stands out as a dividend champion. What’s more, the payout is covered three times by earnings per share, and the enterprise has a zero debt, cash-rich balance sheet, which only adds to its appeal in my view.

The UK is facing a chronic housing shortage, and homebuilders like Bellway are struggling to match demand. It is unlikely this supply/demand mismatch will end any time soon and, as a result, I think it is highly likely that homebuilders will continue to churn out impressive profits for the foreseeable future.

I think Bellway is one of the best investments to play this trend because, not only does the stock support a dividend yield of 5%, it is also trading at a deeply discounted valuation of just seven times forward earnings compared to the sector average of 10.5. This valuation gap tells me investors could see both impressive dividends and capital gains in the years ahead. What’s not to like?

Market leader

The final dividend king that I think is worth buying and holding forever is M&C Saatchi (LSE: SAA).

The best investments tend to have a strong brand and durable competitive advantages, and Saatchi is one of the most influential brands in the marketing world. This year, analysts are forecasting a 144% increase in earnings to 22p, which puts the stock on a forward P/E of 17. Earnings per share could expand a further 5% next year according to current City estimates, leaving the stock trading at a 2020 P/E of 16.1.

Saatchi stands out when it comes to the company’s dividend. Over the past five years, the dividend has grown at an average annual rate of 15% and has doubled since 2018. Right now the shares support a dividend yield of 3.2%, and the distribution is covered 1.9 times by earnings per share. According to these numbers, if the payout continues to grow as it has done during the past five years, investors buying today can look forward to a dividend yield of 6.4% by 2024.

Of course, it’s not the only dividend growth share that could help you to overcome the disappointing State Pension. Reporting on Friday was a media stock which appears to offer good value for money, alongside a fast-rising dividend.

Improving outlook

The stock in question is advertising and PR specialist M&C Saatchi (LSE: SAA). The company reported a positive set of interim results which suggest that further profit growth is ahead. Gross profit for the first six months of the year increased by 5% to £127.2m, while profit before tax moved 26% higher to £16.7m.

The company’s global network performed well, with like-for-like (LFL) gross profit in the UK rising by 10%. There was also positive performance in the rest of the world, with the company’s strategy of opening new businesses and offices set to deliver further improvements to its financial performance. The company also separately announced that its CFO will be standing down in the next 12 months.

Looking ahead, M&C Saatchi is forecast to post a rise in earnings of 11% in each of the next two financial years. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 1.5, which suggests that it could be undervalued.

With a dividend yield of 2.8%, the stock may seem to lack income appeal. But with dividends due to rise by 10% per annum over the next two years, and shareholder payouts being covered 2.2 times by profit, the total return potential of the stock seems to be high.

Improving outlook

The dividend growth potential of Sainsbury’s also seems to be relatively impressive. The company’s shareholder payouts are covered 1.9 times by profit, and could be positively catalysed by the earnings growth which is forecast over the next two years. The business is expected to deliver bottom-line growth of 2% this year, followed by a further rise of 4% next year. Given the challenging trading conditions faced across the UK retail sector, this would represent a strong performance.

As mentioned, the acquisitions of Argos and Asda could fundamentally reshape the Sainsbury’s business model. Synergies from the deals could provide a boost to profitability, while the cross-selling opportunities appear to be high. The benefits of the acquisitions could help to shield the wider business from the effects of higher inflation and Brexit uncertainty at a time when competition in the retail segment continues to increase.

With Sainsbury’s having a dividend yield of 3.4%, its income return is likely to remain above inflation over the coming years. Since it has the potential to become an even more dominant UK retailer over the long term, now could be the right time to buy it. The stock could help investors to overcome that disappointingly-low State Pension.

Since the end of May last year, the stock has returned 38%, compared to the FTSE 250’s gain of 13%, excluding dividends, over the same period.

Over the past two years, Homeserve’s performance is even more impressive. The stock has returned 68%, more than tripling the return of the FTSE 250. And I believe that this performance can continue as the home services group continues to build on its existing customer offering.

Global expansion

Today Homeserve reported its results for the year ended 31 March, which show that the group’s efforts to diversify outside the UK are more than paying off. 

For the period under review, statutory operating profit increased 29%, and basic earnings per share jumped 26% year-on-year overall. Adjusted operating profit in North America rose 146% as the number of customers increased by 20% to 3.6m. Meanwhile, France and Spain both delivered double-digit growth in adjusted operating profit, up 13% and 20% respectively.

What is exciting about this business is that customers clearly appreciate its offering, which management continues to expand. Homeserve expanded into three new business lines during the last fiscal period: Home Experts; plus HVAC (Heating, Ventilation and Air Conditioning); and Smart Home. The number of customers worldwide increased 7% to 8.4m with a retention rate of 82%. With profits growing nearly three times faster than customer numbers, it looks as if the group is active in cross-selling new offerings.

As my Foolish colleague, Royston Wild recently pointed out, the one downside of this company is its valuation. Specifically, the stock currently trades at a forward P/E ratio of just under 24. However, with customers flocking to the group’s offering, and management’s record of completing bolt-on acquisitions to help boost growth successfully, I believe the shares can continue to beat the FTSE 250.

Dividend growth 

Another mid-cap I’m optimistic on the outlook for is M&C Saatchi (LSE: SAA). This marketing group might not be a big household name, but investors should consider it for their portfolio.

M&C Saatchi is investing for the future, building offices around the world to improve exposure to new clients. Unfortunately, while the spending should pay off in the long run, it has impacted short-term profitability. Still, looking past these temporary headwinds, I think the future is bright for the firm.

Earnings per share are expected to rebound by 260% in 2018 to 25p as one-off expansion costs fall away, and analysts have pencilled in growth of 9% for 2019. 

The City is also expecting the company to maintain its record of dividend growth. Over the past six years, the annual dividend distribution to investors has more than doubled, and an increase of 10% per annum is expected for the next two years.

The current yield of 2.6% might not be the highest around, but it’s covered 2.5 times by earnings per share and is backed up by £7.5m of cash on the balance sheet. In my view, if you’re looking for income, this is undoubtedly one stock to consider.

The two companies I’m looking at today are both facing changes. But so far they’re both coping well, and are rewarding shareholders with strong dividend growth.

Turnaround completed

After a difficult few years, public relations group Huntsworth (LSE: HNT) appears to be back on the growth trail. The company’s restructuring has increased its focus on the healthcare sector, where it is a specialist.

Huntsworth shares rose by 5% when markets opened this morning after the firm reported a strong set of 2017 results. Sales rose by 9% to £197m last year, while headline pre-tax profit rocketed 54% higher to £24.4m. Headline earnings per share rose by 45% to 5.8p per share, beating consensus forecasts of 5.35p per share.

These increased profits were backed by improved cash generation. Free cash flow rose from £2.9m to £20.7m, providing support for a 15% hike in the total dividend, which rose to 2p per share.

Time to buy?

Huntsworth shares have doubled in value over the last year, but I think the shares could still offer value for new buyers.

Earnings are expected to rise by around 10% this year, putting the stock on a forecast P/E of around 13. Dividend growth is also expected to remain strong and analysts have pencilled in a payout of 2.1p per share, giving a forecast yield of 2.6%.

I’d rate the PR firm’s shares as a buy at current levels.

Will this firm be crushed online?

Traditional advertising businesses are facing huge disruption due to the internet. Big advertisers are shifting billions of dollars of spending from television- and billboard-type advertising to Facebook and Google.

Internet advertising can be targeted and its results tracked in a way that’s impossible with mass media advertising. So are traditional ad agencies doomed?

Bosses at M&C Saatchi (LSE: SAA) don’t think so. In the firm’s half-year report in September, chief executive David Kershaw told investors: “We have been busy starting new businesses and opening new offices. This is the fuel for growth in years to come.”

The firm’s financial performance appears to back up these ambitious claims. Revenue, adjusted for exchange rates, rose by 12% to £121m during the first half. Adjusted pre-tax profit was 17% higher at £13.3m.

However, as my Foolish colleague Zach Coffell explains, these headline figures were flattered by the exclusion of certain items. The group’s statutory profits for the period actually fell, as costs rose more quickly than sales.

What’s happening?

Promoting a brand online and running successful, big-budget internet advertising campaigns requires skilled staff and a lot of data analysis. Most advertising agencies now offer this kind of service, so can acts as middlemen for advertisers wanting exposure online.

Saatchi appears to be investing for the future. This could pay off — indeed, I suspect the group will adapt and thrive over the coming years. However, with the stock trading on 16 times adjusted forecast earnings, I think much of the good news is already in the price.

At the very least, I’d want to wait for the firm’s full-year results later this month before making an investment decision.

As such, stocks that are able to do so could experience higher demand from investors over the medium term. This could lead to share price growth for such companies, thereby increasing their total return prospects. With that in mind, here are two smaller companies that could be strong income plays in the long run.

Mixed performance

Reporting on Thursday was private label household and personal care products specialist, McBride (LSE: MCB). The company’s first half performance was somewhat disappointing, with revenue falling by 0.6% at constant currency, while adjusted operating profit was one-third lower versus the same period of the previous year.

The business has experienced margin pressure due to higher inflation. This has caused difficulties in some of its divisions, although it is putting together a new strategy to try and transform its performance. The business continues to operate in line with market expectations, while it remains confident in the growth opportunity that may be ahead in the medium term.

With McBride’s earnings due to rise by 16% in the next financial year, its future appears to be bright. Dividends per share are due to increase by around 17% in the next financial year, which puts it on a forward dividend yield of 3.5%. And with dividends being covered nearly three times by profit, there seems to be scope for further dividend growth over the long run.

Robust growth

Also offering impressive income prospects in the small-cap arena is advertising and PR company M&C Saatchi (LSE: SAA). The company has a solid track record of dividend growth, with shareholder payouts having increased at an annualised rate of 14% during the last five years. And with dividends due to rise by over 6% in each of the next two years, inflation-beating income growth looks set to be ahead for the company’s shareholders.

Of course, M&C Saatchi’s financial performance is closely linked to the outlook for the global economy. On this front, there seems to be a positive outlook, with the prospects for the world economy being generally upbeat. This suggests that further earnings growth could be ahead, with the stock forecast to post a rise in its bottom line of 7% this year and 8% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 1.7. This indicates that they may offer growth at a reasonable price.

With dividends being covered 2.4 times by profit and it yielding 2.7%, the company’s income outlook seems to be sustainable. As such, and while a potentially cyclical stock, the income potential for investors in the business seems to be high.

M&C Saatchi’s (LSE: SAA) half-year report points out that “headline results” is not a defined term under International Financial Reporting Standards, meaning the finance department can decide what costs to exclude without restriction. 

There is a vast gulf between the statutory and headline figures reported today and I believe this could be a hindrance, not a helping hand, for investors trying to understand the business. Have a look at the impact of adjustments:

• Headline profit before tax increased 17%
• Statutory profit before tax decreased 10%

A few perfectly legal omissions have been applied to supposedly present a more accurate picture of business performance, including share-based payment expenses. In the first half of this year, these totalled £6.85m. That’s a significant cost and I’d be ok with the exclusion it if it truly was a one-off, but it seems to be a regularly incurred cost.

Last year, for example, the company excluded nearly £8m in share-based payment charges from headline profits. This helped it present headline profit before tax as up 18%, compared to actual profit before tax which dropped roughly 46%.  

That said, the company is making advancements. Revenue grew 21%, or 12% at constant currency, and this is reflected in the 15% increase in the interim dividend. However, I’ll be avoiding M&C Saatchi because I just can’t get comfortable with the accounting practices or the balance sheet, which is dominated by intangible assets. 

The power of borrowed brands

A stock I’m far more interested in is Character Group (LSE: CCT). At last count, this £97m market cap toymaker had net cash of £18.6m and traded on a P/E of just under 10.

Character cashes in on the power of brands like Disney, Bob the Builder, Peppa Pig and — most recently — Pokémon, through licensing agreements. It then designs quality toys based on these IPs and outsources manufacturing.

This approach has turned it into a capital-light cash cow. The management team takes care of shareholders via buybacks and dividends too. The shares yield a solid 3% and the share count has reduced from 52.8m in August 2005 to 20.9m today. Buybacks on that scale can be a huge driver of shareholder returns. The company is still buying today, a great decision given the current low valuation. 

One of the company’s largest clients, Toys R US, was recently granted bankruptcy protection in the US, although Character Group has admitted it is still unsure how this will impact its business going forward. I’m not too worried about this short-term blip and believe any downside is more than priced-into the aforementioned dirt-cheap valuation.

Shares in the company are up 280% over the last five years and that return doesn’t include dividends.

Bright future

Reporting on Thursday was global PR and advertising company WPP (LSE: WPP). Its shares fell around 2% following the release, with the company reaffirming target sales growth of just 2% for the full year. Much of this growth will be weighted towards the second half of the year due to weak comparatives.

Despite the company’s share price fall, its overall performance was relatively upbeat. Revenue growth of 16.9% was somewhat flattering, though, since 13.3% growth was from currency fluctuations and 3.4% was from acquisitions. As such, organic growth remains relatively low, which indicates that the global economy continues to face a somewhat challenging period.

Of course, WPP’s business model has always been focused on acquisitions and Thursday’s update did little to change this fact. Looking ahead, its earnings are due to rise by 9% this year and by a further 7% next year. This puts it on a price-to-earnings growth (PEG) ratio of 1.9, which given its dominant position within its industry seems to be a fair price to pay. As a result, following its share price decline of 7% since the start of the year, WPP could deliver FTSE 100-beating performance in the long run.

Growth and income potential

Also highly dependent on the performance of the global economy is fellow advertising and PR specialist M&C Saatchi (LSE: SAA). As with WPP, its shares have declined this year and have underperformed the FTSE 100 by around 8%. However, with earnings growth of 8-9% per annum forecast for the next two years, this situation could easily be reversed.

The chances of outperformance of the wider index are enhanced by M&C Saatchi’s valuation. It trades on a PEG ratio of 1.8, which appears to be relatively low given its track record of growth. Furthermore, it continues to offer a degree of adaptability as well as a nimble business model which few of its larger peers can match. This could provide it with above-average growth in what remains an uncertain global economy.

While M&C Saatchi currently yields just 2.3%, it is forecast to raise dividends per share by over 25% during the next two years. Alongside a dividend payout ratio of just 39%, this indicates that dividend growth may be relatively high over a sustained period. With inflation moving higher, this could improve the company’s income appeal and lead to higher demand from investors for its shares.

Advertising on the up

M&C Saatchi (LSE: SAA) might not be an obvious candidate for growth investors, who are often looking for explosive growth over a short period.

But the advertising agency’s record is impressive, with EPS having climbed from 15.1p in 2012 to 21.07p for the year ended in December 2016. That’s an overall rise of 40% over four years, and a 13% gain in 2016 alone.

As a result, the share price is up 136% in five years, while the FTSE 350 index has gained just 32% over the same period — and anything that beats the index by such a large margin definitely falls under my definition of growth.

Forecasts do suggest a slowing of earnings growth with just 9% on the cards for this year, to give a PEG of 1.8, which is high enough to fly above the limit that most growth investors look for. But to me that just hides a steady long-term growth prospect.

Revenue in 2016 grew by 26% to £225.3m (and up 19% at constant currency), with operating profit up 24% to £23m. And it’s not just the UK, where Brexit could signal a few tough years for the industry — Saatchi saw big revenue gains in the Americas, the Middle East, Africa, Asia and Australasia.

Chief executive David Kershaw called the year outstanding, adding that “we are confident that we will continue to make good progress in 2017 and beyond.“

The dividend was raised by 15% to 8.29p per share, and while a yield of 2.3% on today’s share price is not a huge income, it’s a nice annual bonus to be added to any future share price growth.

Jam tomorrow?

Oxford Biomedica (LSE: OXB) shares have lost 59% over two years to 5.3p, so you might wonder what growth I see there. I could point out that we’ve seen a bit of a recovery of late, and that the price is actually up 68% from its recent low in October 2016, but that’s only part of the picture.

The bigger picture is one of ‘growth tomorrow’, hopefully, as Oxford Biomedica is a small biotech firm specialising in gene and cell therapy. It is not making any profits yet — and isn’t expected to this year nor next either, though the forecast loss per share should drop considerably in 2018.

The key to the firm’s 2016 results announcement was not in its finances, though it appears to have enough cash for now, especially after fundraising £17.5m during the year. But the key is in the collaboration agreements it has with other firms making use of its “world-leading lentiviral vector delivery platform for gene and cell therapy” (to use the words of chief executive John Dawson).

The firm’s collaboration with Novartis for what it calls a “blockbuster potential product” is said to be progressing well and is “close to market“, and collaborations with Orchard Therapeutics, Immune Design and others have been expanded with a new research and development collaboration with Green Cross LabCell.

The company’s own proprietary developments, which target conditions including Parkinson’s, cancer tumours and corneal graft rejection, also appear to be progressing well, though they’re mostly at relatively early stages of development.

Oxford Biomedica is a classic blue sky investment right now, but I think we’re looking at a future growth star.

Looking back at the last four years, Restore has been able to increase its bottom line at a double-digit rate each year. This is due to its excellent business model, which benefits from a relatively high amount of repeat business and offers a high degree of stability and consistency. And with Restore forecast to record a rise in earnings of 9% this year and 11% next year, it would be of little surprise for investor sentiment towards the stock to improve.

With Restore trading on a price-to-earnings growth (PEG) ratio of 1.7, it appears to offer significant upward rerating potential. As such, now seems to be an excellent time to buy a slice of the company – especially with the economic outlook for the UK being rather uncertain.

Growth and more growth

Similarly, advertising specialist M&C Saatchi (LSE: SAA) has recorded excellent growth of late, with its shares being up by 13% in the last three months. As with Restore, M&C Saatchi has a strong track record of growth and its bottom line has risen by over 8% per annum during the last five years. With further growth forecast for the next two years, M&C Saatchi’s PEG ratio stands at just 1.2, which indicates that its capital gains prospects are high.

Clearly, M&C Saatchi’s business model is relatively cyclical and while there are a number of risks facing the UK and world economies, it seems to be well-prepared to overcome them. Notably, it’s relatively well-diversified, has a strong management team and with a sound balance sheet, M&C Saatchi looks set to deliver relatively resilient growth over the medium-to-long term. Therefore, now seems to be a logical time to buy it.

Risks and rewards

Meanwhile, 88 Energy (LSE: 88E) is a much higher-risk play than either Restore or M&C Saatchi. That’s at least partly because the company has no revenue at the present time and is therefore entirely reliant on news flow. As has been the case so far in 2016, this could be positive, but it could equally cause a period of disappointment for the company’s investors following 88 Energy’s share price rise of 300% since the turn of the year.

However, 88 Energy is also riskier than Restore and M&C Saatchi because the oil and gas sector’s future outlook remains highly uncertain. So, while 88 Energy could be of interest for less risk-averse investors and may go on to deliver further share price gains, for most investors the likes of Restore and M&C Saatchi hold vastly more long-term appeal.