3 small cap ASX shares to buy in January

I think that there are a large number of small cap shares trading on the Australian share market that have the potential to grow significantly in the future.

While not all these shares will fulfil their potential, three that I think are showing signs that they will are listed below.

Here’s why I think they are worth considering in January:

Citadel Group Ltd (ASX: CGL)

Citadel is a leading software and technology company that specialises in secure enterprise information management in complex environments. It has a wide range of customers across various sectors including health, national security, and defence. The key attraction to the company for me is its Citadel-Information Exchange (Citadel-IX) cloud-based enterprise information management platform. It allows users to securely access and transfer proprietary and sensitive information remotely. Given how important data security is and how much more data businesses are creating, I believe demand is likely to continue growing strongly in the future.

ELMO Software Ltd (ASX: ELO)

ELMO Software is a leading provider of cloud-based human resources and payroll software solutions. It has been experiencing growing demand for its software since listing on the ASX and pleasing this continues to be the case today. I was very impressed with the start the company made to FY 2019. In the first quarter it reported quarterly cash receipts growth of 91% on the prior corresponding period to $10.3 million. I feel confident that there will be more of the same over the course of FY 2019 and beyond thanks to the quality of its offering and its large addressable market.

Megaport Ltd (ASX: MP1)

Megaport is a provider of elastic interconnection services across a growing number of data centres globally. It had a stellar FY 2018 and delivered an impressive jump in revenue once again. Pleasingly, the company has started FY 2019 strongly and recently reported a 20% increase in its monthly recurring revenue to $2.4 million. And with the cloud computing boom continuing to accelerate, I believe it is well positioned to continue this above average growth for some time to come. It is a high risk option though, so may only be suitable to investors with a high tolerance for risk.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ELMOSFTWRE FPO. The Motley Fool Australia has recommended ELMOSFTWRE 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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