2 stellar small cap ASX shares to watch

Keep an eye on these ASX small caps…

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As well as being home to countless bank and mining shares, the Australian share market is home to a good number of promising small caps.

Two small cap shares that could be worth watching closely are listed below. Here’s what you need to know about them:

Adore Beauty Group Ltd (ASX: ABY)

The first small cap to watch is Adore Beauty. It is Australia’s leading online beauty retailer with almost 700,000 active customers.

Adore Beauty has been growing very strongly during the pandemic thanks to the shift online. And while its growth in FY 2022 is likely to be far more subdued as it cycles heightened sales from the prior period and some shoppers return to physical stores again, it has been tipped to resume its strong growth once the tough comparisons ease.

This is especially the case given the relatively low penetration of online beauty sales compared to other Western markets. This gives it a very long runway for growth over the next decade according to analysts at UBS.

In light of this, its analysts currently have a buy rating and $5.60 price target on the company’s shares.

Over The Wire Holdings Ltd (ASX: OTW)

Another small cap to watch is Over The Wire. It is a one-stop-shop for information technology and telco services, including data networks, VoIP, hosting, security, and support. It was recently named in the Financial Times Top 500 High-Growth Companies Asia-Pacific 2021. And it’s not hard to see why.

Over The Wire has been a strong performer in recent years and this has continued in FY 2021. During the first half, the company reported a 17% increase in revenue to $50.3 million and a 28% jump in EBITDA to $10.5 million.

But perhaps the biggest positive from this is that almost all of its revenue is now recurring, with recurring revenue growing 25% to $45.9 million. This gives Over The Wire a firm foundation to build on in the coming years.

Canaccord Genuity is positive on the company. It currently has a buy rating and $4.85 price target on its shares. And while its shares have just breached this level, it could be worth keeping an eye on regardless.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Over The Wire Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Over The Wire Holdings Ltd. 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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