UK inventory Renold (LSE: RNO) is backed by a enterprise with a market capitalisation of round £140m. So it’s a small-cap enterprise and never for widows and orphans.

However, the worldwide provider of commercial chains and associated energy transmission merchandise has executed its shareholders proud over the previous few years. However director-speak makes me imagine there could also be extra to come back.

A multi-bagging share price

Within the 2020 pandemic sell-off, the share price plunged to round 6p. At the moment (17 July), it’s close to 59p, and the corporate simply topped that spectacular progress with a bumper set of full-year outcomes.

Though small-cap shares may be dangerous, they’ll typically additionally ship excessive rewards for buyers.

Nevertheless, it might have taken a stout coronary heart to purchase the inventory within the wake of the pandemic when economies have been crashing. I first grew to become occupied with November 2021 and typed a bullish article with the inventory close to 30p.

It’s executed all proper since then, however chief government Robert Purcell mentioned in right now’s report the enterprise is now at an “inflection point”.  The compounding impact of many current thrilling initiatives is “coming to fruition”.

It’s exhausting to argue with that evaluation. Within the 12 months to 31 March 2024, adjusted earnings rose 20% yr on yr. Internet debt dropped by greater than 16% too, suggesting a robust money efficiency backing up the enterprise progress.

To top-off the constructive really feel to the report, the administrators initiated a small dividend for the yr of 0.5p per share. That’s the primary in round 19 years, and I believe that tells us one thing concerning the enterprise and the sector — issues may be powerful for each.

There’s no denying the cyclicality current right here. Certainly, numerous the sturdy positive aspects loved by shareholders since 2020 have come from the enterprise turning itself round. Even now, a half-decent normal financial down-turn may pull the rug from revenues, earnings, money flows, dividends, and the share price. To flirt with this inventory is to flirt with such ongoing dangers.

Regular progress forward?

However Purcell is optimistic concerning the firm’s future. Steady enchancment initiatives are constructing an “ever-improving” platform to assist the administrators’ business initiatives.

The main focus is on focusing on and consolidating the “highly fragmented industrial chain market” with an acquisitive progress technique. There’s a wealthy pipeline of “appropriately sized and relatively low-risk opportunities”, Purcell reckons.

In the meantime, the administrators count on the present buying and selling yr to be much less difficult however they’re remaining vigilant.

My assumption is that this enterprise is on a long-term progress trajectory now. However progress might be slower than we’ve seen lately. Metropolis analysts have pencilled in a rise in normalised earnings of about 13% for this yr and eight% subsequent.

Nevertheless, these potential advances are wanting the double- and triple-digit proportion positive aspects seen these days.

However, when set in opposition to these estimates, the forward-looking earnings a number of appears undemanding at round eight. On steadiness, and regardless of the dangers, I believe this inventory is price additional research now with a view to contemplating the inventory for a long-term funding.