2 very exciting small cap ASX shares to buy

ELMO Software Ltd (ASX:ELO) and this ASX small cap share could be worth watching closely. Here’s why they have been given buy ratings…

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There are a lot of options at the small end of the market for investors to choose from.

Two small caps that could be worth getting better acquainted with are listed below. Here’s what you need to know about them:

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based human resources and payroll software platform company. The company’s increasingly popular platform streamlines a number of processes such as employee administration, recruitment, on-boarding, learning, performance, remuneration, compliance training, and payroll.

It recently released its half year results and revealed further strong growth in its annualised recurring revenue (ARR). At the end of December, ELMO’s ARR reached a record $74.2 million. This was an increase of 42.8%. Management advised that this was underpinned by a combination of organic growth and the benefits of acquisitions.

Pleasingly, it still has a long runway for growth in the ANZ and UK markets. Furthermore, thanks to its jurisdiction agnostic platform, it has the option to expand internationally in the future.

Morgan Stanley is positive on the company. It currently has an overweight rating and $9.70 price target on its shares.

Mach7 Technologies Ltd (ASX: M7T)

Another small cap to look at is Mach7. It is a medical imaging data management solutions provider which uses software to create a clear and complete view of the patient.

In addition, management notes that Mach7’s award-winning enterprise imaging platform provides a vendor neutral foundation for unstructured data consolidation and communication to power interoperability. This enables healthcare enterprises to build their best-of-breed clinical ecosystems.

Last month the company released its half year results and revealed that its ARR had grown to $10.2 million at the end of the period. This was up 88% on the prior corresponding period and provides 64% coverage of its operating expenses.

Analysts at Morgans appeared to be happy with its performance. In response, they retained their add rating and lifted their price target to $1.68.

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*Returns as of January 12th 2022

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 and MACH7 FPO. The Motley Fool Australia has recommended Elmo Software and MACH7 FPO. 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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