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Here are 3 small caps analysts have their eyes on

As the S&P/ASX 200 plunges in sympathy for its US cousins, it’s a good time to do some research into small caps that might have big futures, according to the experts. 

Three small caps that have been on the minds of analysts for good reason lately include: 

Terracom Ltd (ASX: TER)

Terracom Ltd is a new miner on the block with a portfolio of projects in the coal-bearing regions of Mongolia, Central Asia and Queensland. 

At today’s trade Terracom shares are sitting down 4.7% at 20c a stock, but expectations from analysts are for a strong quarter of results from the new-starter, with a positive operating cash flow of $5.7 million expected after less-than-favourable figures booked in the previous 12 months. 

Terracom still has a fair whack of debt – in the realm of $225 million – but analysts tip its BNU CHPP and rail load-out will be the key to an earnings lift, with the company’s Blair Athol facility to be commissioned in March and set to reduce costs by $20 a tonne. 

The recommendations are set to buy for now, with the current share price much lower than analyst price targets for 12 months which have been set at 69c a share. Remember these kind of investments come with considerable risk though, especially where companies carry considerable debt.

Bigtincan Holdings Limited (ASX: BTH)

Bigtincan Holdings Limited has followed its big brothers into the red for the moment with the share price down 4.6% to 41c a stock, but the share price has consistently been on the up this calendar year. 

Bigtincan is a software provider for sales and service organisations looking to reduce expenditure, improve customer satisfaction, and worker productivity. It has customers across 35 countries and operations across diverse market segments. 

Analysts see Bigtincan’s propensity to find new partners the key to its strong growth potential, with the company recognised for its work to control costs in the back office while it wins new partners in the USA, Europe and Asia Pacific up front. 

Analysts have increased their FY18 forecasted revenue for the $88 million market cap company to $18.6 million, with Bigtincan already sitting around the 12-month share price valuation of 47c/share. 

Codan Ltd (ASX: CDA)

Electronic product designer and manufacturer Codan Ltd has experienced some volatility in its share price in the last 12 months and sits down 1.8% at $2.12 at the time of writing. 

Analysts are expecting strong first-half results out of the company, which provides software to governments and businesses across Australia, the UK, USA, Ireland, China, India and UAE. 

Forecasts put Codan’s FY18 profit at around $15 million with a full year profit tipped to be double that from a base range of $20 million to $25 million. 

Codan introduced a significant new product launch late last year, which could push results along as strong dealer interest was noted and the tracking solutions and defence electronics side of the business is moving along well. 

The buy recommendation is strong for Codan with 12-month valuations from analysts sitting up at $3.20 per share and potential acquisition opportunities to expand distribution channels on the horizon too. 

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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