2 small-cap stocks that could be millionaire-makers in 2018

Investing in the FTSE 100
Investing in the FTSE 100

For many investors, finding stocks with upside potential is tough, even in the most genteel of market conditions. However, with share prices continuing to push higher, and the FTSE 100 making record high after record high, it may seem more challenging than ever to find the right investment opportunities. After all, no investor wants to buy any asset at a price which is too high.

With that in mind, here are two smaller companies which could realistically offer high returns in the long run. Both released updates on Monday and could be set to deliver rising share prices in future.

Improving performance

Scientific instrument specialist Judges Scientific(LSE: JDG) released a positive trading update for the 2017 financial year. It has seen strong demand for its products in the second half, with organic order intake increasing by 16% versus the prior year. This means that the company enters 2018 with a robust order book that totals almost 15 weeks of sales compared to almost 14 weeks at the same time last year.

Encouragingly, the two businesses within the group that had experienced lower demand in 2016 recovered to normal levels of orders, sales and profitability. The business, which had been affected by production and supply chain problems, has made progress, while wider group sales and profits were driven by a healthy order intake and favourable exchange rates. As such, it is anticipated that earnings for 2017 will be ahead of expectations.

Due to its positive update, the Judges Scientific share price increased by 6% on Monday. However, it continues to trade on a price-to-earnings growth (PEG) ratio of just 1.3. This suggests that it could offer upside potential from its current price level and may be worth buying for the long term.

Growth potential

Also reporting on Monday was aesthetics company Sinclair Pharma(LSE: SPH). It announced a trading update for 2017 which showed that sales increased from £37.8m in 2016 to £45.3m. This represented headline growth of 20%, with sales up 25% between H2 and H1. A modest EBITDA (earnings before interest, tax, depreciation and amortisation) is expected for the year as a while.

The restructuring of its European operations started to bear fruit during the year. Growth potential in Korea and in the Middle East also remains high in the long run, while the company remains upbeat about its potential to increase sales in the next 12 months.

With Sinclair Pharma forecast to return to a black bottom line in 2018, and then deliver 290% profit growth in 2019, now could be an opportune moment to buy it. The company appears to have a sound strategy which could provide solid growth for a number of years. Having a forward price-to-earnings (P/E) ratio of 9.5 using 2019's forecast earnings figure, it appears to offer a wide margin of safety.

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Peter Stephens owns shares in Judges Scientific. The Motley Fool UK has recommended Judges Scientific. 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.

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