2 buy-rated small cap ASX shares growing rapidly

Here’s why Adore Beauty Group Limited (ASX:ABY) and this rapidly growing small cap ASX share are rated as buys right now…

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A happy woman raises her face in celebration, indicating positive share price movement on the ASX

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The good news is that if you’re a fan of small cap shares, there are a number of companies at the small end of the market 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 them:

Adore Beauty Group Limited (ASX: ABY)

The first small cap ASX share to look at is Adore Beauty. It is Australia’s leading online beauty retailer. Due to the tech selloff, the Adore Beauty share price is now trading materially lower than its IPO price of $6.75. This is despite the company smashing expectations during the first half of FY 2021 with strong sales and operating profit growth.

For the six months ended 31 December, Adore Beauty delivered revenue of $96.2 million and EBITDA of $5.2 million. This was up 85% and 188%, respectively, over the prior corresponding period. This result went down well with analysts at UBS. In response to its release, the broker put a buy rating with a $6.20 price target.

Mach7 Technologies Ltd (ASX: M7T)

Another small cap ASX share to look at is Mach7. It is a medical imaging data management solutions provider.

Demand for its award-winning enterprise imaging platform has been growing strongly in recent years, leading to very strong annualised recurring revenue (ARR) growth.

For example, at end of the first half of FY 2021, Mach7 revealed that its ARR had grown to $10.2 million. This was up a sizeable 88% on the prior corresponding period. Another big positive is that its ARR now provides 64% coverage of its operating expenses. This means the company is well-placed to start making a profit in the near future.

Morgans is a fan of the company and appears to have been happy with its performance. In response to its results, the broker retained its add rating and lifted its price target to $1.68.

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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 MACH7 FPO. The Motley Fool Australia has recommended 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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