These promising small-cap stocks could be millionaire-makers in 2018

While the stock market may have risen to a record high this year, there are still a number of stocks which could be worth buying. Clearly, the general level of share prices is now higher than it has been in the past. But with the prospects for a number of sectors being relatively positive, there could be upside potential ahead.

That's particularly the case with smaller companies, where valuations may not have risen by as much as their larger stock market peers in recent years. With that in mind, here are two small-cap stocks which could deliver high returns this year.

Encouraging performance

Reporting on Tuesday was SIPP provider Curtis Banks(LSE: CBP). The company's performance in 2017 was encouraging, making strong progress with the integration of Suffolk Life Group. It traded in line with management expectations, with new SIPPs during the year amounting to 8,798, and overall SIPP numbers increasing to 76,474. Attrition rates on own SIPPs have remained in line with previous years at 5.7%, with the company's assets under administration totalling £24.7bn, versus £20.4bn last year.

Looking ahead, Curtis Banks is expected to report a rise in its bottom line of 12% in the current year, followed by further growth of 10% next year. Despite such a strong rate of growth, its shares trade on a price-to-earnings growth (PEG) ratio of only 1.5, which suggests that there could be upside potential ahead.

In addition, the company has improving income prospects. It's expected to have a dividend yield of around 2.3% in the current year. But with dividends due to be covered 2.5 times by profit, there could be significant growth ahead here. As such, the total return on offer could be high in the long run.

Improving outlook

Also offering investment potential within the wealth management space is Brooks Macdonald(LSE: BRK). The company's financial performance is linked to that of the stock market, so it's perhaps to be expected that it's forecast to deliver strong earnings growth in the near term. In fact next year, the company's bottom line is expected to rise by 22%, which puts it on a PEG ratio of 0.6. This suggests that it may be deserving of a higher valuation if it's able to deliver on the upbeat forecasts.

Shareholders are expected to benefit from rising earnings via a higher dividend. In fact, shareholder payouts are forecast to rise by 22% in the next financial year. This would put the stock on a dividend yield of 3.1%, with dividends being covered 2.3 times by profit. This suggests that further double digit dividend growth could be on the cards, which could make Brooks Macdonald a worthwhile income play.

Certainly, the company may not offer the stability of other income stocks over the long run. But for investors who are concerned about inflation, it could be a realistic alternative.

Millionaire potential

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Peter Stephens has no position in any company 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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