3 exciting small cap shares on my watchlist

Luckily for fans of small cap shares, the Australian share market is home to a number of exciting small caps with significant future growth potential.

Three which I think are well worth having on your watchlist today are listed below. Here’s why I like them:

ELMO Software Ltd (ASX: ELO)

I think that this cloud-based talent management software solutions company could be one to watch in FY 2018. In FY 2017 the company delivered a 26% increase in revenue to $17 million, 4% ahead of its prospectus forecast. Earnings growth was even stronger and came in 42% ahead of its forecasts at $1.2 million. The good news is that more of the same is expected in FY 2018 thanks to increasing demand for its software solutions.

Livetiles Ltd (ASX: LVT)

I’ve been very impressed at the progress that LiveTiles has made in the rapidly growing artificial intelligence market. Ultimately management aims to gain a leadership position in the market and I think it is well on its way to doing so thanks to recent agreements with Microsoft and the Clean Energy Smart Manufacturing Innovation Institute. The Microsoft agreement, for example, will see LiveTiles’ Bots product promoted to the tech giant’s business customers. This is expected to support significant subscription revenue growth in FY 2018 and beyond. One slight concern I have, though, is that it has been burning through its cash balance and could potentially require a capital raising this year.

Volpara Health Technologies Ltd (ASX: VHT)

This digital healthcare company has developed an impressive piece of technology that enables personalised, high-quality breast cancer screening based on automated, objective measurements of breast density, compression and radiation dose. A recent update revealed that its total contract value added in January was NZ$1.2 million, up 400% on the prior corresponding period. As a result, annual recurring revenue (ARR) has increased to over NZ$3 million, from NZ$1.1m at the end of FY 2017. I think this puts the company well on track to exceed its 200% ARR growth target for FY 2018.

Finally, if you like small cap shares like these then I think you'll love these growth stars of the future.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Cochlear or REA Group.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ELMOSFTWRE FPO. The Motley Fool Australia owns shares of VOLPARA FPO NZ. The Motley Fool Australia has recommended LIVETILES FPO. 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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