I think these 3 small-cap growth stocks are the real deal. But are they too expensive?

first_img See all posts by Paul Summers Image source: Getty Images. Bought at the right time and the right price, small-cap stocks can do wonders for your wealth.Today, I’m looking at three great examples, all of which report to the market next month. 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…Gaming for growthCambridge-based video games developer and publisher Frontier Developments (LSE: FDEV) releases interim results on 5 February. From a business perspective, I doubt those already holding have much to fear.Earlier this month, the company indicated that total revenue for the six months to the end of November would be £32m – a 28% rise on that achieved over the second half of the previous financial year. That said, it’s worth mentioning that this would be significantly less than the near-£65m achieved over the same period in 2018, highlighting the extent to which sales in this industry can fluctuate according to when games are released.Having “performed well” over the festive period (and based on the initial success of Planet Zoo – its fourth franchise), Frontier’s management now believes full-year sales will come in within analyst expectations of between £65m and £73m. Boasting a strong net cash position and rising returns on capital, this is the sort of company I’d usually get in line to buy. On an eye-watering forecast price-to-earnings ratio of 54, however, a lot of the good news looks firmly priced in.With shares up 40% in just six months, I’m inclined to wait and see if results day brings out the profit-takers.In a sweet spotAnother small-cap reporting next month (25 February) is chocolatier Hotel Chocolat (LSE: HOTC).Like Frontier, the AIM-listed firm enjoyed a sweet 2019, with its share price soaring almost 60%. Hotel is also generating great sales momentum, announcing last week that total group revenue over the 13 weeks and 26 weeks to 29 December had climbed 11% and 14% respectively. The company is also growing its presence, both in the UK (nine new stores were opened over the second half of 2019) and abroad (four sites in the US and five in Japan). It boasts over 1.1 million active members in its VIP-Me scheme and is even targeting the vegan market with its new Nutmilk chocolate – deemed an “immediate hit” by management. Talk of “modestly higher” costs “due to inefficiencies in the supply chain” may explain why the shares took a temporary dive last week but I think it’s more to do with the valuation – a very steep 44 times earnings.It’s a great business but I’m conscious that no stock is worth buying at any price, especially a high street retailer.Cleaning upA third small-cap showing great positive momentum of late is infection prevention and contamination control product manufacturer Tristel (LSE: TSTL).December’s AGM statement from the Snailwell-based business was brief but highly encouraging for those already holding.Thanks to contributions from recent acquisitions, management reported that pre-tax profit for the first half of the financial year would be “no less than £2.8m” (£2.4m was achieved over the same period in 2018).This, combined with news that its push for regulatory approval for its products in the US was “progressing well” has only served to send the shares higher.Like both Frontier and Hotel Chocolate, however, the valuation is looking frothy at 33 times forecast earnings. Having climbed 85% since November, I have my doubts about whether the stock can maintain its current momentum.Half-year numbers will be confirmed on 24 February. Enter Your Email Address Simply click below to discover how you can take advantage of this. 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. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Our 6 ‘Best Buys Now’ Sharescenter_img 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. “This Stock Could Be Like Buying Amazon in 1997” Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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. Paul Summers | Friday, 31st January, 2020 | More on: FDEV HOTC TSTL I think these 3 small-cap growth stocks are the real deal. But are they too expensive?last_img

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