With the big banks and the miners seemingly going up and down more than an elevator these days, investors could potentially find greater returns by looking at smaller ASX-listed companies.
Although small caps come with a higher level of risk compared with with their blue chip equivalents, I believe that if you choose carefully you could go some way to reducing this risk.
A few weeks ago I picked out four tech shares which I believed could grow into billion dollar companies. Here's three more that I believe could do this as well:
Catapult Group International Ltd (ASX: CAT)
This leading sports analytics company has just produced a stunning quarterly result which has taken the share price higher by almost 20% in the last month. In what has traditionally been the company's slowest quarter, the third quarter saw unit orders leap 118% year-on-year setting it up for a great full year result.
Judging by the fact that it has a growing client list that includes the biggest names in sports it appears to be delivering results. This is backed up by the company's low churn rate of less than 1%.
Management estimates the addressable market will grow from $125 million in 2014 all the way up to $4.7 billion by 2021. With Catapult being one of the market leaders, I believe it is positioned well to grow at a rapid pace for the next five years.
Clearview Wealth Ltd (ASX: CVW)
ClearView is a life insurance, wealth management and financial advice solutions company with a market capitalisation of $570 million. The stand out performer for the company in its latest half-year results was its life insurance segment which grew net profit after tax by over 65% year-on-year. This segment's strong performance helped ClearView increase overall underlying net profit after tax by 35% year-on-year.
According to CommSec, analysts are expecting earnings to grow at an unbelievable average rate of 79% per annum through to FY 2018. Priced at 51x earnings currently, the shares do not come cheap. But if it delivers on expectations, few will mind paying a premium for the shares.
Webjet Limited (ASX: WEB)
Webjet has delivered top line growth for an impressive 10 consecutive years. I believe that thanks to the growth in tourism across its key markets this will continue to be the case for a good number of years more.
In its interim results management reaffirmed full year EBITDA guidance of $33.5 million. But due to its strong performance in the first-half which saw EBITDA growth of 26.4% year-on-year, I feel there is a good chance it will produce a beat on earnings expectations.
Analysts are expecting earnings to grow at 17% per annum in FY 2017 and FY 2018. If it manages to deliver on these expectations then I can see the company making a climb towards a billion dollar market capitalisation.
There is a fourth share which I believe could also do the same in the future as well. This tech share is one which I feel could produce equally strong returns for shareholders in the next few years.
