Although small cap shares are inherently riskier than their blue chip counterparts, I believe that the potential rewards on offer can make some of them well worth considering.
The key to investing successfully in the space is sorting the quality from the sub-par options.
Three quality small cap shares which I think have enormous potential are listed below. Here's why I would consider buying them this month:
Citadel Group Ltd (ASX: CGL)
Citadel is a ~$404 million software and technology company specialising in secure enterprise information management in complex environments. It has a diverse range of customers across sectors including healthcare, national security, and defence. The reason I'm a big fan of the company is its Citadel-Information Exchange (Citadel-IX) cloud-based enterprise information management platform which allows users to securely access and transfer proprietary and sensitive information remotely. Considering the importance of data security and how much more data businesses are creating, I expect demand to continue growing strongly in the future.
Megaport Ltd (ASX: MP1)
Megaport is a ~$465 million provider of elastic interconnection services across data centres globally. I was very impressed with its performance in FY 2018 and the start it has had to FY 2019. Last week it released its global update which revealed that in the second quarter the company increased its reported revenue by 21% to $8.3 million and monthly recurring revenue by 14% quarter on quarter. 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.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a ~$222 million provider of breast imaging analytics and analysis products used to improve clinical decision-making and the early detection of breast cancer. I've been very impressed at how quickly the company has grown its share of the U.S. breast screening market and wouldn't be surprised to see this continue in FY 2019 thanks to the quality of its offering and the expansion of its sales forced. This should put it in a position to deliver another year of stellar annual recurring revenue growth.
