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The London Stock Exchange is home to many small-cap shares trading at cheap or reasonable valuations. In a sea of speculative AI and quantum computing stocks abroad, these homegrown firms offer a grounded alternative, in my opinion.
Here are two AIM-listed shares that I think are set up to do well over the next few years.
Ramsdens
First up, we have Ramsdens (LSE:RFX). The £113m-cap company does pawnbroking, foreign currency exchange, and the buying and selling of jewellery both online and through 169 high street branches.
Ramsdens’ precious metals segment has been on fire lately due to the surging gold price. In the 12 months to 30 September, gross profit increased 50% year on year as its weight of gold purchased jumped roughly 15%.
Elsewhere, the pawnbroking loan book grew 8% to £11.5m, as last year’s launch of a new dedicated pawnbroking website attracted new customers. For the full year, management expects pre-tax profit to be slightly ahead of market expectations for £15.4m (up at least 35%).
Looking ahead, Ramsdens is bullish on its prospects and expects to open between eight and 12 new stores per year. This expansion adds risk, of course, as there’s no guarantee that the new locations will do well. After all, the British high street is in long-term decline, and the firm recently chose to merge two of its central Glasgow stores.
However, Ramsdens is supplementing its physical presence with a growing online operation. Moreover, gold is tipped to continue rising as central banks buy record amounts of the metal to diversify away from the US dollar and geopolitical risk. So I think the firm is well-placed to carry on growing and increasing its profits.
The stock is up 76% in the past year. Yet the valuation doesn’t look stretched, with the forward price-to-earnings (P/E) ratio of just 9.8. There’s also a handy 4.1% forecast dividend yield on offer.
Whilst we have benefited from the sustained high gold price within our purchase of precious metals segment, we’ve also continued to make good progress across our other income streams. In particular, our continued success in jewellery retail highlights a growing awareness of our value for money proposition.
Ramsdens CEO Peter Kenyon
SpaceX-fuelled growth
The second stock is Filtronic (LSE:FTC). This £287m company designs and manufactures specialist products for the aerospace, defence, space, and telecoms infrastructure markets.
The stock is up nearly 800% over the past two years, and shareholders can thank Elon Musk’s rocket and satellite firm SpaceX. That’s because Filtronic has a lucrative deal in place to supply components for the space exploration giant’s Starlink satellite constellation. In August, it signed a record $62.5m (£47m) deal with SpaceX.
However, the share price has recently paused for breath after its massive rally. In fact, it’s down 24% since June, putting the stock on a more reasonable forward P/E ratio of 36 (for FY27, which starts in June).
That multiple might come across as high, and there’s admittedly a lot of customer concentration risk here. SpaceX accounted for 83% of FY25 revenue.
Taking a five-year view, however, I’m bullish on the firm’s prospects. Not only is it likely to pick up further supply contracts for SpaceX’s growing Starlink constellation, but I think Filtronic should have attractive opportunities in defence as Europe rushes to build up its military capabilities.
This story originally appeared on Motley Fool
