2 small-caps that could be monsters in the making

Premier Technical Services(LSE: PTSG) is a small company that's grown rapidly over the past few years, and it looks as if the firm is only just getting started

The company is the UK's leading provider of façade access and fall arrest equipment services as well as high-level cleaning and training solutions. The group operates in niche markets which require a high level of skill and specialised equipment. Rising demand for the company's services, as well as its leading position in the market, means that over the past three years, earnings per share have doubled and analysts are expecting further growth of 14% this year.

Rapid earnings growth

For 2014, Premier reported sales of £18m. For 2017, City analysts are projecting sales of £47m rising to £59m next year. Off the back of this growth, the company's earnings per share are set to hit 9.3p for 2018, up from 3.8p for 2014.

Considering the specialised nature of its business, it looks as if this growth can continue for the long term. As well as organic growth, management is hunting out bolt-on acquisitions to boost overall performance. These additions are helping to improve not only the top line, but also the bottom line as operational efficiencies help widen margins.

The firm acquired peer BEST early in July 2017 to enhance Premier's number one market position in the lightning protection market following the buyout of Nimbus Lightning Protection in January 2017.

Unfortunately, shares in the equipment provider aren't cheap. They trade at a forward P/E of 19.2, but this multiple seems appropriate considering its past growth and opportunity to consolidate further, build on its existing client base and improve margins.

Proven management and company

Proactis(LSE: PHD) is another company that flies under the radar of most investors but has enormous potential. The company offers spending and procurement solutions to help organisations better control expenditure on all goods and services.

Since 2013, demand for these offerings has exploded. Pre-tax profit should come in at £5.3m for the fiscal year ended 31 July 2017, up from just £300,000 for fiscal 2013. Analysts are expecting earnings per share growth of 17% off the back of this performance.

And even though shares in Proactis currently look expensive as they trade at a forward P/E of 20.9, considering the growth potential, this is a premium worth paying. For the financial year ending 31 July 2018, analysts are expecting earnings per share growth of 38%, giving a PEG ratio of 0.4. However, I wouldn't be surprised if the company surpassed these forecasts as management recently completed the "transformational" acquisition of Perfect Commerce LLC, which is already generating additional revenue for the group and has offered opportunities for significant synergies. Overall, the combined groups are targeting £5m of synergies, a significant figure considering the pre-tax profit of £5.3m expected for the year just ended.

As Proactis reaps the benefits of this deal and looks for other acquisitions, I believe the company can grow significantly, producing attractive returns for investors in the process.

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Rupert Hargreaves owns no share 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.

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