2 rapidly growing small cap ASX shares to watch

Volpara Health Technologies Ltd (ASX:VHT) and this small cap ASX share could have bright futures ahead of them…

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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:

Nitro Software Ltd (ASX: NTO)

Nitro is a global document productivity company. It helps businesses of all sizes eliminate paper, accelerate business processes, and drive digital transformation. This is achieved by providing PDF productivity and eSigning for all in a single, affordable solution.

At present, Nitro is helping drive digital transformation across more than 11,000 businesses globally. This includes 68% of the Fortune 500 and three of the Fortune 10.

It was a very strong performer during FY 2020. For the 12 months ended 31 December, Nitro reported a 64% increase in annualised recurring revenue (ARR) to $27.7 million. This was driven by increasing demand for its popular Nitro Productivity Suite.

Positively, similarly strong growth is expected in FY 2021. Management’s guidance for the year ahead is ARR in the range of $39 million to $42 million. This will mean year on year growth of 41% to 51.6%.

One broker that is a fan is Morgan Stanley. Its analysts currently have an overweight rating and $3.70 price target on the company’s shares. This compares to the current Nitro share price of $2.63.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX share to watch 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.

Volpara also has a growing number of add-on solutions that work with VolparaEnterprise and are expected to boost its average revenue per user (ARPU) metric in the future. These include its VolparaDensity, VolparaDose, VolparaPressure, VolparaLive, and VolparaPositioning products.

Management estimates that its whole suite of products equates to US$10 per user, which is seven times greater than its current ARPU of US$1.40. Combined with further market share gains, this could support significant revenue growth in the future.

Morgans is positive on Volpara’s future. It currently has an add rating and $1.94 price target on its shares. This compares to the latest Volpara share price of $1.23.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*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 VOLPARA FPO NZ. The Motley Fool Australia has recommended VOLPARA FPO NZ. 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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