Two small-caps with millionaire-making potential

Champagne poured into a row of flutes

Investors would be forgiven for not having heard of industrial and medical adhesive manufacturer Scapa Group (LSE: SCPA), but that's a shame. The company has delivered some truly fantastic returns for investors in the know over the years.

Over the past five years alone, the company's share price has risen from under 100p per share to its current price of 424p. Of course, the pertinent question to ask is whether the group can deliver this sort of return in the future.

I have my doubts, but given management's proven ability to consistently beat already lofty investor expectations, I'm not ruling it out. There is certainly good top-line growth potential as the company extends its relationship with key customers to manufacture even more of their products ranging from high performance aluminium foil for industrial applications to advanced wound care products for global behemoths like Convatec.

In healthcare, growth is being driven by general market expansion, deepening already long-standing relationships with customers as well as small bolt-on acquisitions. At the industrial end, top-line growth will be more dependent on good global economic growth, but there is certainly potential for substantially increased profits as the group closes less profitable factories and shifts into higher-margin businesses.

Last year, the group's revenue growth was a sedate 3.1% in constant currency terms, but a strong focus on margin improvements saw adjusted earnings per share lift 23% to 18.2p. While the top-line figure wasn't all that impressive, management has shown in the past it can kick start growth when need be. And with net debt of only £3.8m at year-end, there is substantial firepower to make further acquisitions.

While the company's stock isn't cheap at 22 times forward earnings, I think it's well worth looking at for growth-hungry investors thanks to it proven ability to boost revenue and an increased focus on increasing already decent margins.

Nuts and bolts 

Another small-cap that's flown under the radar but kept shareholders very, very happy is Trifast (LSE: TRI), which has seen its share price rise over 265% in the past half-decade. This terrific share price performance is unsurprising when looking at Trifast's financial reports with the company seeing an increase in revenue over the five-year period from £129m to £197m and underlying per-tax profits jumping from £9.2m to £22.2m.

This is down to a couple of factors. One is good general economic growth, which means more demand for the high-end fasteners Trifast makes. Then there is management's decision to wisely move up the value-added ladder by investing more in R&D and working closely with customers.

While further global economic growth is uncertain given rising trade tensions, Trifast is well-placed to survive any downturn and actually expand at the expense of rivals due to very low-cost production facilities and net debt of just £7.4m at year-end. And with revenue right now fairly evenly split between the UK, Europe and Asia, the business is well diversified and has considerable growth prospects ahead of it in the massive US market that accounted for only 3% of turnover last year.

At 16 times forward earnings, Trifast isn't cheap for a fairly cyclical firm, but with a strong record of organic and acquisition-led growth, as well as rapidly improving margins, I think its one to consider for growth-hungry investors.

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Ian Pierce has no position in any of the 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.

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