A potentially overlooked small-cap I may buy for my Stocks and Shares ISA
With the market getting a little hot in places, Iâve increasingly found value for my ISA among the small-cap stocks. One AIM-listed business that recently caught my eye is Journeo (LSE:JNEO). Itâs a transport technology firm quietly executing a high-quality strategy.
Performing as expected
The company released a trading update on 29 July that confirmed performance in line with market expectations. Though group revenue dipped 4% year on year to £24.5m in H1, this masks underlying progress.
Notably, Fleet Systems revenue jumped 46% to £13.5m, and Passenger Systems rose 17% to £6.1m. The drop in headline revenue stemmed from the absence of a £3.4m contribution from the New York subway project in H1 2024. Encouragingly, follow-on purchase orders worth over $5m are now secured for H2.
Profitability’s intact, with adjusted pre-tax profit flat at £2.8m, despite the revenue decline. Gross profit edged up to £9.2m, and the company ended June with £18m in net cash â up from £12.9m last year. This accounts for around 30% of the total market-cap â something to bear in mind when assessing valuation metrics.
Looking ahead, management expects full-year revenue of £52m and adjusted PBT of £5.2m, both in line with forecasts. Those figures are only up 3-5% annually but, importantly, order intake rose 25% to £30m, and the sales pipeline now stands at £80m. This offers visibility into 2026 and reflects Journeoâs growing reputation across UK and international markets.
Ok, what is Journeo?
So what does the company actually do? Journeo designs and installs information systems for vehicle fleets and transport infrastructure, combining hardware, software, engineering services, and managed support. For us as consumers, this means things like real-time information display boards, but much more behind the scenes.
It helps customers â mainly public transport operators and local authorities â upgrade legacy systems, reduce costs, and improve efficiency through digital transformation. The firmâs open-platform, IP-enabled technology is flexible, making it suitable for diverse use cases both on and off vehicles.
Currently, the company’s trading around 14 times forward earnings. This would be a little expensive for a stock only growing at 3% per annum. However, Iâd like to believe earnings progression would be stronger beyond 2025. In theory, there are long-term drivers in transportation infrastructure which should support demand in the coming decade.
Itâs also important to note that the enterprise value-to-EBITDA ratio’s around six times. Thatâs much lower because of the extremely strong balance sheet.
The bottom line
The main risk here is customer concentration. Journeoâs revenues are driven by contracts with a limited number of large operators and transport bodies, notably in the UK. Delays or cancellations to these projects could hit earnings hard. Even a change of government could hurt â or boost â the company. However, the rising order book and expansion into North America and Europe help reduce this exposure.
However, with its £18m net cash, scalable technology platform, and deep industry know-how, Journeo looks like a small-cap worth considering for my Stocks and Shares ISA. Execution risks remain, but the current valuation could become compelling as the path forward becomes clearer. Itâs high up on my watchlist.
The post A potentially overlooked small-cap I may buy for my Stocks and Shares ISA appeared first on The Motley Fool UK.
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James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
