Hidden Gems: 2 Microcap Stocks Outperforming the Market

Are Microcaps Worth Your Attention?

Microcap stocks often get a bad rap. Many investors think they’re too risky and volatile, dismissing them as speculative bets. But that might be missing out on some hidden gems. Some microcaps quietly generate impressive returns without attracting much attention.

Meet the Underdogs

This article shines a spotlight on two such microcap companies: Jyoti Resins and Adhesives Ltd. and Swastika Investmart Ltd. These companies have been steadily growing their profits and market share, often with figures that dwarf their larger counterparts.

Jyoti Resins and Adhesives Ltd.

Since its inception in 1993, Jyoti Resins has carved out a niche as a leading manufacturer of synthetic resin adhesives, particularly under its popular brand, Euro7000. With a market cap of Rs 1,525 crore, Euro7000 holds the second position in the retail segment for wood adhesive white glue in India.

What makes Jyoti Resins stand out?

• Exceptional ROCE: The company boasts a Return on Capital Employed (ROCE) of 50%, significantly higher than the industry median of 15%. This means for every Rs 100 invested, the company generates Rs 50 in profit.
• Impressive Growth Trajectory: Jyoti Resins has seen its sales skyrocket at a compound annual growth rate (CAGR) of 31% from Rs 74 crore in FY20 to Rs 284 crore in FY25. EBITDA and net profits have also followed suit, growing at 26% and 56% respectively.
• Share Price Surge: The company’s share price has surged over 3,000% since May 2020, from Rs 40 to its current price of Rs 1,274. Even at this price, it’s trading at a 30% discount to its all-time high.

Swastika Investmart Ltd.

Founded in 1992, Swastika Investmart Ltd. is a financial services powerhouse offering a wide range of services, including stock and commodity trading, depository services, portfolio management, research, and more. With a market cap of Rs 227 crore, the company boasts a network of over 800 market experts serving over 4.4 lakh customers.

What sets Swastika Investmart apart?

• Strong ROCE: The company consistently delivers a healthy Return on Capital Employed (ROCE) of 33%, exceeding the industry median of 19%.
• Impressive Growth: Swastika Investmart has witnessed significant growth in its sales, EBITDA, and net profits, with CAGRs of 22%, 38%, and 95% respectively between FY20 and FY25.
• Share Price Appreciation: The company’s share price has surged over 835% since May 2020, from Rs 14 to its current price of Rs 131. Despite this, it’s trading at a 44% discount to its all-time high.

Microcaps: Undervalued Opportunities?

These two examples demonstrate that while microcaps often face skepticism, they also offer potential for significant returns. Jyoti Resins and Adhesives and Swastika Investmart highlight the importance of looking beyond market hype and focusing on solid fundamentals. While these companies might not be household names, their consistent performance deserves attention from investors seeking hidden gems in the market.

Disclaimer: This article is for informational purposes only and should not be considered investment advice. Always consult with a qualified financial advisor before making any investment decisions.