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Three high growth small-cap plays

A trio of modestly rated cash-rich and high growth small-cap plays offer scope for material upside
Three high growth small-cap plays

I spend considerable amount of time number crunching through research notes to reconcile analysts’ projections with management guidance. The aim is to anticipate those companies likely to beat estimates in the market, and avoid the underachievers.

It’s an exercise well worth doing as I found with niche packaging engineering business Mpac over the summer (‘Deep value buys’, 11 July 2020). At the time, the directors had withdrawn guidance due to the Covid-19 pandemic, but I noted that Mpac continued to win new orders with original equipment manufacturers (OEMs) and service orders, too, highlighting resilience in the healthcare sector (accounting for three-quarters of annual sales), and in the Americas region (almost two-thirds of sales). I concluded that analysts were being far too bearish on 2020 profit estimates and overly cautious on 2021 numbers. The fact that estimates have been upgraded three times since then tells a story as does the 77 per cent share price rise. The upgrade cycle is not over yet.

It also pays to number crunch ahead of trading updates as I have regularly done with Sylvania Platinum, a South African producer and developer of platinum, palladium and rhodium. Another buying opportunity has presented itself right now as the forthcoming half-year numbers are going to be eye-popping and will prompt significant analyst upgrades, the scale of which is simply not being priced in.

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