Small-cap market review: Two companies showing different paths in tough times
Market analysis shows mixed results for small-cap stocks in recent economic conditions. While some companies manage to stay strong others face hard times - hereʼs what you need to know about two interesting cases
The FTSE Aim All-Share Index hasnt been kind to investors lately showing a big drop of 38% in the past three years (due to high-interest rates and slow-moving economy)
The market presents two different stories of small-cap companies: one of success and another of re-adjustment. Gamma Communications shows strong numbers with its UK-focused business model – generating about four-fifths of its sales locally; their half-year data shows a 10% jump in revenue and 16% growth in pre-tax profits. The companyʼs cash-position sits at £142.9m which opens doors for more buy-outs (theyʼve already done two this year)
Their recurring-revenue model stays solid at 89% of total sales; which makes them a steady-going investment choice. Since early-2018 when it joined our watch-list the companyʼs value went up by 153% – quite different from the indexʼs 32% fall
On the flip-side theres Totally – a health-care services provider thats had a rough time. Even with this years 70% price jump its still down 69% from when we first looked at it in early-2021. Their latest numbers show a 25% year-on-year drop in revenue; plus new wage rules and tax changes might make things harder
- Revenue declined 25% compared to last year
- Current price-to-book ratio around 0.5
- Net gearing stays at 10%
- NHS plans £25.7bn extra spending for 2024-25
The companys low debt and planned cost-cuts could help it bounce back – especially with increased NHS spending coming up. While its priced low now showing some recovery potential; its small size and uncertain market make it a higher-risk pick
