The small end of the Australian share market is home to a number of companies with the potential to grow materially in the future.
Two investors might want to get better acquainted with are listed below. Here’s why brokers rate them highly:
Adore Beauty Group Limited (ASX: ABY)
The first small cap ASX share to look at is Adore Beauty. It is Australia’s leading online beauty retailer.
Adore Beauty has been growing strongly during FY 2021 thanks to the shift online. In fact, things have been going so well it recently revealed that it expects to report full year revenue growth of 43% to 47%.
And while its growth is likely to moderate in FY 2022 as its cycles significantly strong sales growth during the pandemic, its future remains very positive. This is thanks to its leadership position and the structural shift online for beauty sales.
It is worth noting that online penetration rates for beauty products are still much lower than other categories and in comparison to other Western markets.
UBS is a fan of Adore Beauty. Its analysts currently have a buy rating and $5.60 price target on the company’s shares.
Universal Store Holdings Limited (ASX: UNI)
Another small cap ASX share to look at is Universal Store. It is a fashion retailer delivering an ever-changing and carefully curated selection of on-trend products.
Thanks to its strong market position and a favourable redirection in consumer spending, Universal Store has been a very positive performer this year. For example, it delivered a 23.3% increase in half year sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million.
It then followed this up with an even stronger performance in the third quarter. Universal Store reported a 39.6% increase in quarterly sales, putting it in a position to deliver a very strong full year result in August.
Macquarie is positive on the company. Earlier this month it initiated coverage on the company with an outperform rating and $8.60 price target.