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4 exciting small caps on my watchlist

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I think that the local share market is home to a large number of small cap shares with enormous growth potential.

Four up and coming shares that I think investors should be keeping a close eye on right now are listed below. Here’s why I like them:

Bubs Australia Ltd (ASX: BUB)

Bubs is a fledgling goat milk infant formula company which is aiming to follow in the footsteps of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) in China. I have been thoroughly impressed with the number of distribution agreements the company has signed with mother and baby stores and e-commerce platforms in the lucrative market, but only time will tell whether this ultimately turns into sales. With a reasonable amount of success already built into its share price, I think investors ought to wait for proof that Chinese consumers love the product.

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based talent management software solutions provider on the rise. Since listing on the Australian share market the company has not only outperformed its prospectus forecasts, but also its own lofty guidance. This allowed the company to recently raise $45 million through an institutional placement. The funds will be used to support its growth.

Experience Co Ltd (ASX: EXP)

Experience Co is an adventure tourism company that I believe will be a bigger winner from the tourism boom that Australia continues to experience. The company recently saw its share price get walloped after downgrading its full-year revenue and earnings guidance. But this was the result of a negative weather event which has been described as a once in a generation occurrence. I think this has created a buying opportunity and expect Experience Co to bounce back strongly in FY 2019.

Supply Network Limited (ASX: SNL)

Supply Network is an after-market parts supplier to the commercial vehicle industry. It recently provided an earnings guidance update which revealed that business continues to boom. According to the release, Supply Network expects sales revenue for FY 2018 to be approximately $111 million and earnings before interest and tax (EBIT) to be around $11.5 million. Previous guidance was sales of $110 million and EBIT of $10.8 million. I think Supply Network is well worth a closer look.

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Returns as of 6th October 2020

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 and Supply Network Limited. The Motley Fool Australia owns shares of A2 Milk and EXPERNCECO 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 Scott Phillips.

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