At present (9 October), UK small-cap inventory Netcall (LSE: NET) delivered a delightful full-year outcomes report.

I’d give it some critical consideration as a possible purchase if I wasn’t already totally invested with none spare money.

A beautiful sector

The enterprise operates as a supplier of clever automation and buyer engagement software program. That’s promising as a result of software program is a sub-sector of the market that has produced some multi-bagging progress companies over the previous few years.

Nonetheless, smaller corporations do include elevated dangers. This one has a market capitalisation of simply £141m and it lives within the FTSE AIM All-Share Index.

Earnings and share costs might be risky with smaller corporations. Netcall itself was posting some gut-thumping decreases in annual earnings in 2018 and 2019. There’s been a enterprise restoration since, but it surely’s all the time potential for the corporate to hit a foul patch of buying and selling sooner or later.

Nonetheless, immediately’s outcomes are upbeat, and I just like the strong-looking stability sheet, which exhibits a chunky place of web money somewhat than web debt.

However good worth might be extra than simply low-cost or low monetary numbers. The expansion prospects of a enterprise and qualitative elements can play an enormous half as effectively. Such issues are the bedrock of the technique employed by investing famous person Warren Buffett, for instance.

Earnings progress forward

With Netcall, Metropolis analysts anticipate an uplift in earnings of just about 14% for the present buying and selling 12 months to June 2025. That’s encouraging, and my hope is the enterprise can preserve up its progress price within the years following because it rolls out its cloud-based service providing.

In the meantime, Chief govt James Ormondroyd stated the 12 months simply ended (to June 2024) had been considered one of robust efficiency. The constructive figures within the report again up that assertion, such because the 9% enhance in year-on-year income and seven% in earnings.

There’s rising demand for the corporate’s cloud providers and that’s driving elevated income visibility and robust money circulate, Ormondroyd stated.

The enterprise made “significant” advances with its product providing together with the launch of a brand new cloud contact centre answer referred to as Liberty Converse CX. On prime of that, Netcall is integrating GenAI capabilities throughout its broader Liberty platform.

A vibrant acquisition technique

In addition to natural progress, the corporate made three bolt-on acquisitions throughout the 12 months, which improve the agency’s market place and “open up new opportunities”.

Trying forward, Ormondroyd stated constructive gross sales momentum has continued into the brand new monetary 12 months. There’s a “robust” pipeline and product roadmap, and the extent of recurring income is rising.

Issues are going effectively for the enterprise, I’d say, and it might have an extended runway of progress forward. Nonetheless, the market has observed such points of interest. With the share price close to 88p, the forward-looking price-to-earnings — or P/E — ratio for the present buying and selling 12 months is nearly 24 — that’s fairly excessive.

Regardless of the valuation threat, I believe Netcall is effectively value deeper research and consideration and will sit effectively in a diversified long-term portfolio centered on progress.