Can growth hunters afford to miss these electric small caps?


The popularity of its chemical, biological, radiological and nuclear (CBRN) protective masks makes Avon Rubber(LSE: AVON) a great pick for those seeking excellent earnings growth in the years ahead.

Avon Rubber supplies hardware to police services, armed forces and security specialists, and announced another non-Department of Defense (DoD) order for 15,000 masks just last month.

Unique designs like its CBRN/CO Escape Hood makes it a go-to provider for these groups. The company secured $9m worth of orders from a major US police force already for this one product, and it could represent a major sales opportunity should this initial batch perform well.

Avon Rubber's position as an important kit provider to the US DoD bodes particularly well, with defence spend back on the agenda as Washington deals with the increasingly-turbulent geopolitical and terrorist landscape. I fully expect sales of its M50 masks to continue beyond the current contract, which expires before the end of the decade.

But defence is not Avon Rubber's only area of expertise, with recent acquisition activity like that of InterPuls in 2015 building its position in the dairy industry. Trading conditions here have been more difficult recently, but a recent recovery in milk prices bodes well for future sales. The steady market share grab of Avon Rubber's Milkrite dairy liners also reveals terrific top-line growth potential.

Avon Rubber may not prove suitable for those expecting instant returns, with the City expecting a 14% earnings drop in the year to September 2017, due to a moderation in mask orders.

Still, this blip is expected to prove a temporary phenomenon in Avon Rubber's hot growth story.  I reckon a P/E rating of 16.6 times represents great value, given the galloping popularity of the company's defence and dairy products across the globe.

Manufacturing marvel

Electronics manufacturer Acal (LSE: ACAL) is also in great shape to enjoy strong earnings growth looking ahead, in my opinion.

The business saw total orders leap 18% during the six months to September, Acal announced last month, while sales jumped 10% from a year earlier. This is thanks in no small part to the success of recent acquisitions that have put its Design and Manufacturing division 'front and centre' -- this arm now accounts for almost half of all revenues.

While conditions remain tough for Acal, I believe the wide range of products offered up by these recently-acquired units offers terrific earnings security. And Acal is also undertaking cost-saving exercises on the continent to give the bottom line an extra boot, the firm having identified £4m worth of annualised cost savings.

The abacus bashers expect Acal to keep its growth expansion story rolling with a 4% advance in the period to March 2017, followed by an 11% rise in fiscal 2018.

These forecasts create P/E ratings of just 12 times and 10.8 times respectively, comfortably below the long-regarded share picker benchmark of 15 times that is considered reasonable value. I reckon recent share price weakness makes Acal a splendid value stock at the present time.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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