2 particular cases, among small caps : Australian Vintage Group (AVG) and Enero (EGG).
Even if they are in 2 different sectors (wine makers and communication), these 2 stocks have several elements in common : - they are really cheap : PE around 10 and free cash flow yield over 10 %, - both just published good FY 21 results, - they seem to have a growth profile : . thanks to OB Media for Enero (structural growth for OB Media, which offsets the cyclical nature of Enero other businesses) . thanks to its main brands, extension into export markets and development of no alcohol wine for AVG.
I really struggle to understand why both stocks do not benefit from a re-rating. Perhaps, it is just due to the fact that they are not in a very hot sector. Or, it is just a consolidation, after a recent strong performance for both shares (+ 52 % on 1 year for AVG and + 94 % on 1 year for EGG).
Of course, I may miss one of element which explain why the market is so cautious. In the case of Enero, it is true that there has been a lot of changes recently among its shareholders and some may not have finished to sell. Their main shareholder, in particular, has just sold a significant part of its ownership and may want to sell more. In AVG's case, the market seems to discount a 0 growth scenario which looks particularly pessimistic as the company has almost 0 exposure to China. Perhaps the market discounts a scenario where the growth in the UK is not sustainable after the end of the lockdown. But, so far, they have no slowdown for their sales in the UK.
