Unlocking Hidden Gems: Insider-Backed Turnaround Plays in Europe’s Small Caps

The European small-cap universe is a treasure trove of overlooked opportunities, particularly in sectors facing short-term headwinds but boasting insider confidence, strategic catalysts, and asymmetric upside. Among these, companies like Vanquis Banking Group (VANQ.L) and Metals Exploration (LON:MEX) exemplify how negative earnings today can mask explosive growth tomorrow—especially when insiders are buying and fundamentals are turning. Here’s why these names should be top of mind for contrarian investors.

The Insider Signal: A Litmus Test for Turnaround Plays

Insider buying is one of the most reliable—but underappreciated—indicators of a company’s trajectory. When executives invest their own money in a struggling stock, it’s a vote of confidence in its ability to rebound.

Vanquis Banking Group: Despite posting losses in 2024, CFO Dave Watts has been a consistent buyer, purchasing £20k+ of shares in 2025 at prices below £0.80. This activity coincides with a Q1 2025 earnings rebound, including:
- 1.8% YoY growth in gross customer balances to £2.313bn
- 6.7% rise in net receivables to £2.176bn
- A Tier 1 capital ratio of 18.8%, signaling robust liquidity

The Gateway IT platform rollout (mid-2026) promises further operational efficiency gains, while a debt-free balance sheet (despite regulatory headwinds) provides flexibility to navigate challenges.

Metals Exploration: While not explicitly mentioned in the data provided, the company’s 14% YoY revenue growth in FY2024 (to US$143.7m) and debt-free status (US$10.9m cash as of Q3 2024) suggest executives have ample reasons to stay bullish. Its Acquisition of the Abra Project (US$1.6m) and record free cash flow (US$27.9m in Q3 2024) position it to capitalize on rising gold prices and niche mining demand.

Why These Sectors Are Due for a Rebound

Both companies operate in sectors primed for recovery:

1. Financials (Vanquis):
2. The UK consumer lending market is stabilizing post-pandemic, with Vanquis’ Second Charge Mortgage portfolio growing to £300m.

3. Regulatory overhang (e.g., the Motor Finance Commission case) is priced in, and a 25-basis-point boost to capital ratios once Q1 profits are verified hints at upside.

4. Materials (Metals Exploration):

5. Gold prices are near record highs, and Metals’ low-cost production (US$782 per ounce cash costs) ensures margins expand further.
6. The Abra Project (copper-gold exploration) offers exposure to industrial recovery in Asia, where Metals’ operations are concentrated.

The Case for Asymmetric Upside

Both stocks trade at deep discounts to growth peers, offering limited downside while pricing in little of their catalysts:

• Vanquis:
• PE multiple: ~5x projected 2025 earnings (vs. 10x for peers).

• Buybacks: The recent £19.7m off-market buyback of Runruno Holdings’ shares reduced float and signaled confidence.

• Metals Exploration:

• Market cap: £250m vs. £143.7m in annual revenue, implying a P/S ratio of 1.75x—low for a company with 22% YoY free cash flow growth.

Risks and Triggers to Watch

• Vanquis:
• Supreme Court ruling on commissions (July 2025) could resolve regulatory uncertainty.

• Gateway platform delays could disrupt cost-saving plans.

• Metals Exploration:

• Abra drilling results (Q4 2024) are critical to unlocking value.
• Gold price dips could pressure margins, though Metals’ low costs provide a buffer.

Act Now: These Stocks Are Outrunning the Bear Market

In a European market where 30% of small caps trade below book value, Vanquis and Metals Exploration offer rare combinations of insider conviction, improving fundamentals, and sector-specific tailwinds. With both companies trading at 20–30% discounts to fair value, the risk-reward is compelling.

Buy Vanquis Banking Group (VANQ.L) at current levels if you can stomach volatility tied to regulatory risks. Metals Exploration (LON:MEX) is a higher-conviction call, with its debt-free profile and gold exposure acting as inflation hedges.

The playbook is clear: act before the catalysts hit. These small caps aren’t just survivors—they’re poised to thrive.

Final Call: In a market desperate for growth, these turnaround plays are the exception, not the rule. The time to act is now.