Successfully identifying fast growing, undervalued small-cap shares can be one of the most rewarding aspects of investing in the sharemarket.
After all, some of today's biggest companies started their lives as much smaller entities. A classic example of this is Ramsay Health Care Limited (ASX: RHC). Its shares were worth around 80 cents in 2000 – they are now worth more than $73 and the company is valued at $14.8 billion!
While it's obvious that not every small-cap will be that successful, I think putting in some extra time to research potential opportunities is still an excellent idea and will at least give you the chance of finding a share that the rest of the market is yet to catch on to.
With that in mind, here are three small-cap shares that are still relatively unknown, but could have big futures ahead of them:
Smart Parking Ltd (ASX: SPZ)
Smart Parking uses sensor technology to gather and transmit data to provide information on car parking availability to both consumers and car park owners.
The technology is being used by large car park operators, like shopping centres, and is also being adopted by local councils as the technology allows individual parking space sensors to gather and transmit information for management, payment and compliance monitoring. Importantly, the company already has contracts in place in Australia, New Zealand, Costa Rica, and the UK.
Although Smart Parking is not yet profitable, the company is showing some promising signs including revenue growth of 47% in its most recent first half. The company is also debt free and expects further growth in the second half.
Think Childcare Ltd (ASX: TNK)
Although the Think Childcare share price has increased by more than 71% over the past 12 months, it still remains in the shadow of its much larger listed competitor in G8 Education Ltd (ASX: GEM).
Unlike G8 Education, which has a market cap of $1.55 billion, Think Childcare has a market cap of just $68 million. As highlighted here, its relatively small size could make it a takeover target.
Ignoring this possibility, Think Childcare is still reasonably valued as it trades on a multiple of just 14x. The company has started the calendar year well and management expects underlying EBITDA to be up at least 10% before further acquisitions are considered.
Pioneer Credit Ltd (ASX: PNC)
Pioneer Credit is an Australian financial services provider, specialising in acquiring and servicing unsecured debt portfolios.
It has a market cap of just $81 million and operates in the same space as listed debt collection firms – Credit Corp Group Limited (ASX: CCP) and Collection House Limited (ASX: CLH).
Despite its much smaller size, it has delivered impressive earnings growth with earnings per share (EPS) up 103% in the first half.
Pioneer Credit expects this strong growth to continue in the second half and is forecasting profits after tax to be at least $8.8 million. If the company is able to achieve this, the shares appear quite cheap – trading at a price-to-earnings ratio of just over 9.
