Why these two small-cap stocks look good to me

It's a busy week for results this week, and two of Tuesday's have caught my eye:

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Outsourcing woes

I've been following outsourcing firm Interserve(LSE: IRV) for a while, not especially concerned about the firm's debt and not overly worried about its dividend being cut as some had been fearing.

But then the blow was struck, and on 20 February Interserve raised the estimated costs of exiting its Energy for Waste business from £70 to £160m, and the share price crashed by 30%.

Full-year results for 2016 did not make for joyous reading. With average net debt of £391m and now expected to rise to around £450m in 2017, the firm suspended its final dividend -- shareholders are only going to get the 8.1p paid at the interim stage instead of the 24.3p paid last year.

But it seems the bad news was already in the share price, and results day only saw a further fall of less than 1%. At 234p, I cant help thinking the sell-off has been overdone.

Although Interserve recorded a pre-tax loss, we saw a headline pre-tax profit figure down by a fairly modest 17% with headline EPS down 16%, and with revenue constant and an encouraging gross operating cash flow of £239m. In the words of chief executive Adrian Ringrose, it was a "mixed" year, and as long as it really is a one-off then this could be one of those 'buy them when they're down' opportunities that we all hope for.

Forecasts will presumably be downgraded now, but we're likely to be seeing forward P/E ratios of around five to six. I'll cautiously look out for further news, but Interserve could be an oversold recovery bargain.

Growth from beauty

Swallowfield(LSE: SWL) is an AIM-listed company with a market cap of only around £60m, but it's showing impressive growth characteristics. The company, in the personal care and beauty products business, has seen its shares double in value in a year to 341p today -- although that does include a 5.4% drop on first-half results day.

But the results looked good across the board, with revenue up 44%, adjusted earnings per share up 176% year-on-year and the interim dividend more than doubled to 1.7p. Net debt did rise from £4.9m to £5.5m, but that did include additional funding for the acquisition of The Brand Architekts.

Chief executive Chris How told us the firm is "being rewarded with good growth and a steady stream of new business wins and contract renewals", and expects accelerating growth.

On the fundamentals front, Swallowfield's valuation looks attractive to me as a growth prospect, with a forecast 17% full-year EPS rise suggesting a P/E of 17 and a PEG of 1.0, dropping to 14.3 and 0.8 respectively based on 2018 prognostications.

Dividends look set to yield only around 1.5% and 1.8% this year and next, and while they're not something to retire on just yet, they are very well covered by forecast earnings and look strongly progressive -- and a welcome bonus for a company at this stage with attractive growth prospects.

Swallowfield is a small AIM stock, and that does bring its own share of risks -- not the least of which is an AIM regulatory regime that many think is woefully inadequate. I'd need to dig further and would probably wait for full-year results, but I'm cautiously optimistic about Swallowfield's prospects over the next few years.

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Alan Oscroft 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.