These high-flying small-caps look ridiculously cheap

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flying

Today, I'm looking at two high-flying small-cap stocks that have both risen approximately 35% over the last year, making their shareholders wealthy in the process. Despite the strong gains, neither stock looks expensive right now.  

John Menzies

£586m market cap John Menzies(LSE: MNZS) provides time-critical logistics and support services, operating through two segments, aviation and distribution. Menzies Aviation services the airline industry, offering services such as ramp and cargo handling, re-fueling and de-icing, while Menzies Distribution helps businesses move goods from one place to another, through a fleet of 1,900 vehicles. Each day, the distribution business delivers 300,000 units of products to over 25,000 destinations.  

The logistics specialist endured a rough patch between 2011 and 2015, with revenue stagnating and earnings falling, and the company cut its dividend in 2014. However, a turnaround now looks to be underway.

Interim results released this morning show a turnover increase of 21% to £1,217m, and a 43% rise in underlying operating profit to £30.1m. Underlying earnings per share rose from 18p to 21.8p, and the company hiked its interim dividend by an impressive 11%. Chairman Dermot Smurfit sounded upbeat about the results, stating: "overall, I am very pleased with the Group's performance in the first half and we look to the future with confidence as demonstrated by the increased dividend payment."

For the full year, City analysts expect revenue to jump 20% to £2,381m, and earnings per share to rise 14% to 54.5p. That consensus earnings figure places the stock on a forward P/E ratio of just 13.1. A dividend payout of 19.5p is also anticipated, equating to a yield of a healthy 2.7%. 

After rising from 530p to 720p over the last year, the share price has had a good run, however, with the stock's valuation still looking attractive, there could be more to come, in my view.

Low & Bonar

Also trending upwards over the last year is Low & Bonar(LSE: LWB). The £284m market cap performance materials group specialises in designing and manufacturing components which add value to, and improve the performance of, its customers' products.

Like John Menzies, Low & Bonar has struggled to generate meaningful revenue growth in recent years. However, things appear to be looking up, with City analysts pencilling in a top-line rise of 7.3% this year. Half-year results released in July saw revenue rise 16.4%, and adjusted earnings per share climb 25%. The company said that "overall, we remain confident of meeting the Board's expectations for the full year."

On consensus FY2017 earnings of 7.25p per share, the performance materials specialist does not look expensive, and currently trades on a forward P/E ratio of just 11.9. It's also worth noting that the company has attractive dividend prospects, having raised its dividend in each of the last five years. Analysts forecast a dividend payout of 3.2p this year, equating to an attractive forward yield of 3.7%, covered 2.3 times. With these figures in mind, there could be potential for both capital growth and dividend growth here, in my opinion. 

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.