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Are these shares the next Afterpay (ASX:APT) and Appen (ASX:APX)?

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It wasn’t that long ago that Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) were mid cap tech shares.

Today they are multi-billion-dollar companies that have generated long term shareholders with some incredible returns.

While I still believe they have the potential to beat the market for some time to come, due to the law of large numbers, I wouldn’t be expecting the same level of returns again over the next five years.

So, if you’re looking for outsized returns in the coming years, you might want to take a look at these much smaller tech companies:

Audinate Group Limited (ASX: AD8)

Audinate is the digital audio-visual networking technologies provider behind the popular Dante product. This award-winning audio over IP networking solution is used widely across a number of industries globally and is head and shoulders above the competition. In fact, the number of devices enabled with Dante was 2,804 at the end of FY 2020. This is eight times greater than its next biggest competitor according to management. There are also 120,000 Dante trained and certified individuals globally.

And while 2020 has been a tough year for the company because of the pandemic, it was pleasing to see that its sales are now rebounding. I’m confident that when the crisis passes demand will start to grow again and its sales will accelerate. After which, thanks to its leadership position in a sizeable market, I expect Audinate to grow at a strong rate over the remainder of the 2020s.

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based human resources and payroll software company that provides a unified platform that streamlines a wide range of processes. It has been growing at a very strong rate in recent years thanks to the quality of its platform and the increasing adoption of cloud-based business tools.

Pleasingly, this strong form has continued in FY 2021, with ELMO this week reporting record cash receipts of $15.6 million. This was a 29.8% increase on the prior corresponding period. The company has also put some of its hefty cash balance to work with the acquisition of Breathe for an initial payment of 18 million pounds (A$32.4 million). This acquisition provides it with entry into the small business market in Australia, New Zealand, and the UK. It also gives it cross-sell opportunities for its existing modules. Together with other potential acquisitions, I believe ELMO is in a position to capture a growing slice of its large addressable market over the 2020s.

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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 and recommends Elmo Software. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended AUDINATEGL FPO and Elmo Software. 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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