While small cap ASX share carry more risk than their larger rivals, the potential returns on offer makes it worth considering including one or two in a balanced portfolio if your risk profile allows.
But which small cap shares should you be looking at? Two that could be worth getting better acquainted with are listed below. Here’s why:
Avita Medical Ltd (ASX: AVH)
The first small cap to look at is Avita Medical. It is a global regenerative medicine company best known for its Recell system. This is a spray-on skin treatment used for burns victims.
However, Avita isn’t settling for this and is seeking to expand the use of the Recell system. It is aiming to treat vitiligo and is working on a project with Houston Methodist Research Institute on reversing cellular ageing.
While demand for the Recell system softened during the pandemic due to lower burn incidents, the reopening of the US economy has let to demand picking up. So much so, the company recently upgraded its FY 2021 guidance.
This went down well with analysts at Bell Potter. Last week the broker retained its speculative buy rating and $9.80 price target on its shares. This compares to the latest Avita Medical share price of $5.80.
Booktopia Group Ltd (ASX: BKG)
Another small cap to look at is Booktopia. It is the largest Australian-owned online book retailer by market share. At the last count, the company was selling one item every 4.7 seconds, shipping a total of 6.5 million items during FY 2020.
Pleasingly, the company has built on this materially in FY 2021 thanks to the shift to online shopping and its new distribution centre. For example, in the first half, the company shipped a total of 4.2 million units during the six months. This was up 40% on the prior corresponding period and underpinned a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million.
One broker that is tipping further strong growth in the future is Morgans. Its analysts believe Booktopia is well-placed to win market share and realise further scale benefits.
The broker has an add rating and $3.54 price target on the company’s shares. This compares favourably to the current Booktopia share price of $2.57.