If small caps are too high on the risk scale for your tastes, then you might be better off looking at the mid cap space. These companies are lower down the risk scale but still have the potential to generate strong returns for investors in the future.
Two mid cap ASX shares that could be worth considering are listed below. Here's what you need to know about them:
Image source: Getty Images
IDP Education Ltd (ASX: IEL)
The first mid cap ASX share to look at is IDP Education. It is a leading provider of international student placement and English language testing services.
While the lack of international travel and lockdowns have impacted IDP Education notably over the last 12 months, it is bouncing back quickly. In February, management advised that testing volumes in December were broadly in line with those experienced in the final month of 2019 prior to the pandemic.
Since then, a flare up of COVID-19 cases in key markets has derailed its recovery somewhat and could weigh on its second half performance. However, it looks well-placed to rebound again once trading conditions return to normal thanks to pent-up demand.
Another positive for the company is that the pandemic has lessened competition. This could mean IDP Education comes out of the crisis in an even stronger market position. This bodes well for its growth in the coming years.
Analysts at Morgans are positive on the company, particularly given the pent-up demand for its services. It expects this to lead to solid earnings growth over the coming years once trading conditions return to normal. Morgans has an add rating and $28.48 price target on its shares. This compares to the latest IDP Education share price of $22.50.
Nearmap Ltd (ASX: NEA)
Another mid cap ASX share to consider buying is Nearmap. This leading aerial imagery technology and location data company's platform allows users to undertake site visits from the comfort of their home or workplace. This provides significant time and cost savings for users.
Demand for its offering has been growing in the ANZ and North American markets in recent years and looks set to continue doing so. As a result, management is targeting annualised contract value (ACV) growth of 20% to 40% per annum over the long term, with underlying churn of less than 10%.
And while a patent infringement notice is likely to weigh on sentiment in the near term, the part of its offering under scrutiny only applies to 25% of its North American revenue. Another positive is that the news hasn't impacted recent sales in the key market.
Morgan Stanley remains positive on the company despite its legal issues. It has an overweight rating and $3.20 price target on the company's shares. This compares to the latest Nearmap share price of $1.83.
