I think ASX small cap shares could be good to buy at a time like this.
The coronavirus has been very damaging for small caps. It's this end of the market that get hits the most when the share market declines as investors search for the safety of blue chips.
I think investors need to consider the industry and business itself over the size of the company. It's obvious that businesses like travel businesses and banks are going to report huge earnings hits over the next 12 months. But some small caps could actually be very good value.
Keep in mind that with lower interest rates, most businesses should be a valued a bit higher than they would have been otherwise.
Here are two ASX small cap shares that I think could be worth buying right now:
Bubs Australia Ltd (ASX: BUB)
Bubs is a relatively small infant formula business with big growth potential. It specialises in providing goat milk products, which is gaining a lot of traction. But it's also to grow an infant formula range based on organic grass-fed cow ingredients.
The company is growing very fast, particularly with Chinese customers. The company recently announced that in the March 2020 quarter total revenue increased 67% compared to the prior corresponding quarter and it was up 36% on the previous quarter. Total infant formula revenue grew 137% compared to last year. Direct total Chinese revenue more than doubled.
Bubs' performance was so strong that, combined with a focus on lowering costs, it generated a positive quarterly operating cashflow of $2.3 million.
With a secured supply chain, I think Bubs is looking good for strong profit growth in the coming years, which will hopefully lead to very attractive shareholder returns over time.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation business. Before the coronavirus came along, the business was just hitting profitability.
It's this sad environment that is actually suited to accelerate Pushpay's business growth. Cash donations are hard to collect if churches aren't actually holding services. Even if people are still congregating, they may wish to socially distance.
Pushpay means people can donate electronically without needing to be present. The Pushpay product also allows for videostreaming of services.
The small cap has actually increased its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) guidance during this period.
I think Pushpay could be one of the best small cap shares to watch over the next five years.
Foolish takeaway
Both of these small caps have very strong futures thanks to the industries they operate in. At the current prices I'd probably go for Pushpay because it's already profitable which will help it get through this period better than most.
