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2 buy-rated small cap ASX shares with strong growth potential

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At the small end of the Australian share market, there are a number of companies with the potential to grow materially in the future.

Two that investors might want to get better acquainted with are listed below. Here’s what you need to know about these small caps:

Audinate Group Limited (ASX: AD8)

Audinate is a digital audio-visual networking technologies provider best known for its industry-leading Dante audio over IP networking solution. This product is used widely across a number of industries and has begun to dominate its market.

While sales of Dante softened during the pandemic, demand has started to rebound in recent months. This led to Audinate recently reporting unaudited revenue of US$11.1 million for the six-month period ended 31 December. This was in line with the prior corresponding period, which was pre-COVID, and up 19.3% from US$9.3 million during the second half of FY 2020.

One broker that is positive on Audinate is Morgan Stanley. It notes that Audinate had a record-breaking second quarter, which was particularly pleasing given how many of its customers are still struggling with COVID headwinds.

The broker has an overweight rating and $9.00 price target on the company’s shares.

Whispir Ltd (ASX: WSP)

Whispir is a growing software-as-a-service communications workflow platform provider which automates communications between businesses and their workers and customers. This allows users to improve their communications through automated workflows that ensure stakeholders receive accurate, timely, useful, and actionable insights.

Demand for Whispir’s platform has been strong over the last 12 months, leading to some stellar annualised recurring revenue (ARR) growth. This has continued in FY 2021, with Whispir recently releasing a very strong second quarter update.

For the period ending 31 December, Whispir had a strong three months with ARR increasing 29.2% over the prior corresponding period to $47.4 million. This was also an 8.5% increase on its first quarter ARR.

This is still only a small slice of its overall market opportunity. Management estimates that the Workflow Communications platform as a Service market could reach US$8 billion per year by 2024.

Late last year Wilsons put an overweight rating and $5.10 price target on the company’s shares.

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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 Whispir Ltd. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. The Motley Fool Australia has recommended Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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