This article is about three small cap ASX shares that could be worth watching at the moment.
Smaller businesses have the possibility of producing good performance over time because they are much earlier on in their growth journey.
Here are three examples:
Sezzle Inc (ASX: SZL)
Sezzle is a buy now, pay later (BNPL) company that is based in the United States.
The whole BNPL sector is growing at a quick rate, but Sezzle is one that’s growing at an even faster pace.
It recently gave an update for its performance over November 2020. It said that its underlying merchant sales (UMS) jumped 188.5% to US$113 million and annualised UMS also went up 188.5% to US$1.36 billion.
Sezzle’s UMS is being driven by rapidly rising active consumers and active merchants. In November, active consumers rose by 151.5% to 2.07 million and active merchants grew by 164.5% to 24,846.
The recent Black Friday and Cyber Monday saw UMS of US$28.5 million, which was a 146.4% increase for the small cap ASX share.
Sezzle executive Chair Charlie Youakim said: “We are extremely excited about the direction of our business, as we recently partnered with GameStop and eCommerce platform Wix. Sezzle is now offered at Gamestop’s network of more than 3,300 US retail stores, its online store and in the GameStop mobile app. Our integration on Wix is available to all Wix merchants in the US, Canada, India and in the future will be able in other regions as Sezzle expands internationally.”
Over The Wire Holdings Ltd (ASX: OTW)
Over The Wire is a favourite of fund manager NAOS Small Cap Opportunities Company Ltd (ASX: NSC) at the moment.
This business has a number of offerings including a national voice network, public cloud, cyber security services and on-demand cloud connectivity. The company also recently acquired Digital Sense, which mostly provides services to large and government clients. Over 90% of Digital Sense’s revenue is recurring in nature.
Naos believes the small cap ASX share can generate much higher earnings before interest, tax, depreciation and amortisation (EBITDA) over the next 24 months and, along with higher free cash flow generation, could see the company command a higher EBITDA multiple.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a healthcare technology business. It provides breast imaging analytics and analysis products that improve clinical decision-making and the early detection of breast cancer.
The small cap ASX share aims to reduce the mortality and cost of breast cancer by providing clinically validated software that underpins personalized, high-quality breast cancer screening.
A couple of weeks ago, Volpara released its FY21 half-year result where it reported growth of its total revenue by 38% to NZ$9.5 million, with annual recurring revenue up to NZ$19.9 million (up from NZ$15.7 million last year). Subscription revenue rose 71% to NZ$8.8 million.
The company reported that approximately 27% of women in the US had a group product applied on their images and data compared to approximately 25.8% at the end of the prior corresponding period.
Volpara also reported that its gross profit increased by 43% to NZ$8.7 million which represented an increase in the gross profit margin to 92% (up from 89%).
In terms of the outlook, Volpara is continuing to see a high retention rate and growing average revenue. Most new sales now are for two or three products, which represents much higher average revenue per user (ARPU). Volpara says it has a pipeline of new deals. It’s being successful with upselling as it upgrades its MRS 6 users (from the MRS System acquisition) and start moving MRS 7 users to Aspen Breast and Volpara products – this is creating an increase of 200% to 300% of recurring revenue.
The small cap ASX share is also looking for acquisition opportunities which would increase its customer base or improve its skills and products to help increase ARPU and technology.
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Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends VOLPARA FPO NZ. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Over The Wire Holdings Ltd, Sezzle Inc, and VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.