Shares in Renew Holdings(LSE: RNWH) are up 16% over the past 12 months, to 393p, but it's been very much a year of two halves as the price dropped to a low of 290p on 27 June, just a few days after the EU referendum.
Since then we've seen a 36% gain, which could be partly down to the likelihood of some economic stimulus through infrastructure expenditure -- infrastructure engineering is what Renew does, and it's focused 100% on the UK market, so that looks promising to me.
Full-year results today showed a 14% rise in adjusted pre-tax profit to £22.3m, with basic earnings per share up 10% to 23.53p.
The dividend was hiked by 14% to 8p per share for a yield of 2%, which supports the firm's recent progressive policy -- forecasts suggest 9p per share, which would represent a trebling in just six years. And I can't see that failing any time soon as the dividend is backed by strong cash flow this year, which saw the company swing from net debt to net cash of £4.8m.
The firm has a new chief executive in the shape of Paul Scott, and chairman R J Harrison OBE reckons the board is "confident of delivering further growth and continued success" under his leadership.
Renew has shown good PEG valuations in recent years, and though forecasts suggest a bit of a rise to 0.7 in the coming year, I think that's still within an attractive growth range. With a forward P/E of 12.3, I can see a small cap growth opportunity here -- and with a market cap of £240m company, I don't think the risks are too great.
New technology can be profitable, and Smart Metering Systems(LSE: SMS) seems to be doing well from it after having recorded several years of double-digit earnings growth. The firm, which provides entire metering and management systems to energy suppliers, has also enjoyed an impressive share price growth of 487% over the past five years to today's 600p, but is there any more to come?
I think there could be, and while we're looking at a forward P/E of 30 for this year (dropping to 26 for 2017), the shares have been valued at the kind of level for the past few years while earnings have been climbing.
At the interim stage reported in September, the company revealed a 25% rise in revenue to £32.3m, and told us that it "now manages over 1 million utility metering and data assets on behalf of energy suppliers in the industrial and commercial and domestic markets". That might sound like a lot, but it's really just a small inroad into the total number of gas and electricity meters out there, and the roll-out of smart metering is still in its infancy.
Smart Metering has made some key acquisitions and has signed some important new contracts, and I can see attractive potential for a good few more years of earnings growth.
But that does come with a significant caution, from that high share price valuation. I'd say the shares are priced near the top end of their likely growth valuation, and if we see any sign of less-then-stellar growth we could see investors jumping ship -- but if you can handle a bit of volatility, you might want to take a closer look.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Smart Metering Systems. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.