If you’re interested in adding some exposure to the small side of the market to your portfolio then you might want to take a look at the shares listed below.
Here’s why these ASX small caps have been tipped as buys:
Universal Store Holdings Limited (ASX: UNI)
The first small cap to look at is Universal Store. It is a fashion retailer which delivers an ever-changing and carefully curated selection of on-trend products to the younger fashion-focused customer.
Universal Store has been an exceptionally strong performer during the pandemic. This culminated in the company delivering a half year result in February which revealed stellar sales and profit growth. For the six months ended 31 December, Universal Store posted a 23.3% increase in sales to $118 million and a massive 63.6% increase in underlying net profit after tax to $21.1 million.
Key drivers of this growth were strong like for like store sales growth and a surge in online sales. Positively, its like for like sales growth has accelerated since the end of the half. During the first seven weeks of the second half, Universal Store reported like for like sales growth of 28.2%.
Morgans is positive on the company and has an add rating and $8.37 price target on its shares.
Volpara Health Technologies Ltd (ASX: VHT)
Another small cap to look at is Volpara. This healthcare technology company’s VolparaEnterprise software solution is a cost-effective, mission-critical tool that helps clinics deliver the highest-quality breast imaging services.
In addition to this, the company has a growing number of add-on solutions that work with VolparaEnterprise. These include VolparaDensity, VolparaDose, VolparaPressure, VolparaLive, and VolparaPositioning.
These add-ons are expected to support an increase in its average revenue per user (ARPU) metric in the future. Management believes that its whole suite of products equates to US$10 per user, which is eight times greater than its current ARPU of US$1.22. Combined with further market share gain, this could support significant revenue growth in the future.
Morgans is also a fan of Volpara. It currently has an add rating and $1.94 price target on its shares.