Growing small cap ASX shares could be worth researching for potential long-term returns.
Smaller businesses may have the ability to create attractive performance for investors compared to large businesses which have already experienced a lot of growth.
These are two companies that could be worth some attention:
Healthia Ltd (ASX: HLA)
Healthia describes itself as an integrated group of health-based businesses.
It owns Australia’s largest podiatry group, called My FootDr. The clinics are equipped with advanced equipment, which the business claims makes them the most modern podiatry centres in Australia. Healthia also offers other services including physiotherapy, hand and upper limb rehabilitation, orthotic manufacturing (iOrthotics) and podiatry and foot care product distribution (DBS Medical Supplies).
The ASX share has been making acquisitions over the last few years. It recently gave an update for the period to 31 December.
On 30 November 2020, the company successfully completed the acquisition of The Optical Company (TOC) which represented 41 optical stores and eyewear frame distributor, AED.
In addition to the acquisition of TOC, and during the 12 months to 31 December 2020, the company has acquired 13 podiatry clinics, six retail footwear stores and seven physiotherapy clinics, increasing its total businesses owned from 132 to 200.
In the update to 31 December 2020, the ASX share gave some guidance for its FY21 half year result.
Underlying revenue is expected to grow by 40% to 45%, to a range of $62 million to $64 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow by 86% to 103% to a range of $10.7 million to $11.7 million. The EBITDA margin could improve by 425 basis points to 527 basis points, up to a range of 17.26% to 18.28%.
Underlying net profit before tax is expected to rise by between 109% to 124%, up to a range of $7 million to $7.5 million.
Finally, underlying earnings per share (EPS) is expected to increase by 69% to 88%, up to a range of 6.52 cents to 7.24 cents.
Volpara Health Technologies Ltd (ASX: VHT)
The Volpara share price continues to rise in reaction to its acquisition of CRA Health.
A week ago the business released its quarterly update for the three months to December FY21. In that update, the company said that it generated its largest-ever third quarter sales performance, with annual recurring revenue (ARR) rising by 20% to NZ$20.7 million. It received cash receipts of NZ$4.6 million, which the company described as strong.
In the quarterly update, the average revenue per user (ARPU) went up by 5% to US$1.22 for the ASX share. It also said that client churn remains low whilst the US coverage was approximately 27%.
But that was before the CRA Health acquisition.
CRA Health was described as an industry leader in breast cancer risk assessment spun out of the Massachusetts General Hospital. Volpara said that CRA is already profitable, with ARR of over US$4 million and ARPU of US$1.70 and coverage of around 6% of US breast screenings.
A benefit of the acquisition is that CRA’s software is integrated with the major ‘electronic health record’ (EHR) and genetics companies.
The acquisition is going to cost Volpara US$18 million and a further US$4 million depending on if it reaches performance targets and staff retention targets.
After the acquisition, Volpara will have ARR of approximately US$17.5 million and at least one product in use in over 30% of US breast screenings.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended HEALTHIA FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.