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Why this growing small-cap stock is one to watch

first_imgWhy this growing small-cap stock is one to watch Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge! The high-calibre small-cap stock flying under the City’s radar Kevin Godbold | Tuesday, 15th June, 2021 | More on: TAM Small-cap stock Tatton Asset Management (LSE: TAM) doesn’t get much media coverage. I ventured into the cobwebby Motley Fool archives this morning to find the last dedicated article on the company was one of my own from two years ago.Back then, the firm reported strong operational progress, a growing dividend, and had a high yield — a rare combination. And, to me, the stock was attractive with its price near 207p.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…A small-cap stock to watchThe business divides its activities into two reporting segments. And in the trading year to 31 March, the discretionary fund management arm, Tatton, delivered around 84% of overall profit before tax. The remaining 16% came from Paradigm, which provides support services for independent financial advisers (IFAs).Today, the shares change hands around 431p. And shareholders will have enjoyed pukka capital gains and a rising stream of dividends. However, in fairness, most of the stock’s rerating happened in 2021. It ended 2020 around 270p. But the market has now recognised the company’s strong trading through the pandemic and ongoing growth in earnings.Meanwhile, today’s full-year results report underlines impressive ongoing organic growth in trading. And, looking ahead, City analysts expect earnings to increase by around 16% in the current trading year to March 2022.The figures are robust. In the 12 months to end-March, revenue increased by just over 9.3% and adjusted diluted earnings per share moved almost 23% higher. A more than 35% increase in assets under management to £9bn drove the outcome. And the company attracted a further 668 IFA firms to its services, representing an increase of more than 12%.Strong organic growthThere’s no doubt Tatton Asset Management is growing its business well and most of the progress has been organic. I like the strong balance sheet with its net cash position of around £17m. And there’s a multi-year record of steady growth in revenues, with the turnover translating into generally rising cash flow and earnings. And since starting shareholder dividend payments around 2018, the directors have been pushing them higher by chunky increments each year.Meanwhile, the quality indicators impress me. The operating margin and returns against equity and invested capital are all running at mid-double-digit percentages. However, this year’s rerating means the small-cap stock isn’t the bargain I reported two years ago.At a price near 431p, the forward-looking earnings multiple is around 26 for the current trading year. And the anticipated dividend yield is near 2.7%. The market has priced the company for growth, which is fine as long as growth continues near its current pace. But that’s a big ask.Another risk for new shareholders now is that underlying operations will be exposed to cyclical effects from the wider economy. Right now, the markets are booming and the economy is in recovery mode. But things could change in the years ahead.Nevertheless, Tatton Asset Management has demonstrated its resilience and growth credentials. And I’d put the stock on my watch list, waiting for dips and down-days in the markets to offer me a more attractive buying point. Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before! Simply click below to discover how you can take advantage of this. Enter Your Email Addresscenter_img Our 6 ‘Best Buys Now’ Shares Image source: Getty Images. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. See all posts by Kevin Godboldlast_img read more