There are some small cap ASX shares that might be able to deliver solid returns if they can continue to execute on their growth plans.
Smaller businesses might have more growth potential because they're earlier on with their journeys.
These two could be interesting ideas:
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Over The Wire Holdings Ltd (ASX: OTW)
Over The Ware is a reasonably diversified business. It has a number of different segments including Digital Sense, which is a leading sovereign cloud provider in Australia. Over The Wire offers telecommunication services like voice. It also offers cloud infrastructure and data centres.
The business has a number of factors that can help assist its long-term growth strategy. It has a solid recurring revenue base with good margins. This can provide long-term stability.
It plans to keep investing further in its platform to achieve automation and improve its operating leverage.
The small cap ASX share is working on increasing its customer base. Its diversified operations means that it can offer customers a full package of IT and telecommunication services.
Indeed, Over The Wire says:
Over The Wire is a true integrated platform provider, improving our customers' experience by simplifying technology to empower business. Over The Wire is uniquely positioned to provide sustained customer value through our core capabilities and intellectual property to deliver integrated solutions.
The business continues to grow at a double digit rate. In the FY21 half-year result, revenue rose 17%, the gross profit margin improved by five percentage points and earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 28%.
Doctor Care Anywhere Group PLC (ASX: DOC)
Doctor Care is a UK-based telehealth company that is trying to deliver a good patient experience and clinical care through a digitally enabled platform. It works with health insurers, healthcare providers and corporate customers to connect patients with a range of telehealth services.
The small cap ASX share is growing at a relatively quick rate.
In the first quarter of 2021, the small cap ASX share revealed that its underlying revenue grew 16.5% quarter on quarter to £4.4 million and the number of consultations increased 21.9% to 90,500. Over 34,000 consultations were delivered in March 2021, which was 32.3% above the highest month in the fourth 2020 quarter.
Doctor Care Anywhere is expecting to grow revenue by at least 100% above FY20. This growth is expected thanks to growth in the number of people eligible to use the company's services, growth in activations and consultations.
The first quarter of 2021 saw a rise in profitability too. Quarter on quarter, the underlying gross profit rose 7.6% and the underlying contribution rose 2.9% to £0.9 million despite the high level of increased demand on its GPs.
Doctor Care Anywhere's net operating cashflow improved by £1.1 million quarter on quarter to an outflow of £2.4 million in the first 2021 quarter.
Management are expecting that relaxing lockdown measures will accelerate growth thanks to secondary care services and diagnostic pathways. It's expecting demand for its primary care consultations to remain high.
