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5 small-cap shares I’m watching in FY 2020

I’ve not bought many new companies on the local sharemarket over the last 12 months as most of any research efforts are directed towards the US these days, however, there are a few small-cap businesses on the local market worth watching. 

The below list features different companies at different stages of development, from pre-revenue to profitable, and all carry a different level of risk. That being said, I’d still place all of them in the high-risk category, either due to their limited track records, financials or high valuations. As such, they’re probably only suitable for more sophisticated investors confident in their research if at all (for the record, I don’t own any of them).

Serko Ltd (ASX: SKO) is an NZ-based corporate travel management software business with a decent track record of growth. Serko is profitable, growing relatively quickly and the balance sheet is in reasonable shape with a cash balance of $15.7 million. 

EML Payments Limited (ASX: EML) is a payment solutions and software business that grew fiscal 2019 EBITDA 40% to $29.1 million on revenue up 37% to $97.2 million. It has cash on hand of $33.1 million and $15 million of debt. The stock hit a record high of $4.44 on the back of strong results and increased media and institutional investor attention. 

Alcidion Group Ltd (ASX: ALC) is a micro-cap healthcare software business that posted a marginal cash inflow of $282,000 on revenue of $16.9 million for fiscal 2019. The stock has been on a tear in 2019 up from 5 cents to 28 cents today.

Paradigm Biopharmaceuticals Ltd (ASX: PAR) is an osteoarthritis researcher that reported more positive results for its Zilosul drug today. It has around $72 million cash on hand for further clinical trials and is actively looking to partner with ‘big pharma’ to secure more funding and de-risk its business. 

Audinate Ltd (ASX: AD8) is an audio-technology software business that is also profitable and growing at strong rates, thanks to its market-leading technology and position. Shares are up around 120% in 2019, as more institutional investors buy into the company. The shares look a little expensive to me though. 

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Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd, AUDINATEGL FPO, and Serko Ltd. The Motley Fool Australia owns shares of and has recommended Emerchants Limited. The Motley Fool Australia has recommended Alcidion Group Ltd, AUDINATEGL FPO, and Serko Ltd. 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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