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 that investors may want to get better acquainted with are listed below. Here's why they should be on your watchlist:
Damstra Holdings Ltd (ASX: DTC)
The first small cap to watch is Damstra. It is a growing integrated workplace management solutions provider. Its cloud-based workplace management platform is used by businesses globally to track, manage, and protect their workers and assets.
Damstra recently released its fourth quarter update and revealed that its annual recurring revenue (ARR) reached $35 million at the end of the quarter. This was 65% higher than the prior corresponding period. Another positive was Damstra's EBITDA margin, which expanded to a record of 30% during the quarter.
The good news is that management estimates that its total addressable market will be worth US$20 billion by 2022. This this gives it a very long runway for growth.
While the team at Morgan Stanley only have a neutral rating on its shares, their price target of $1.25 is notably higher than where its shares trade at present.
MNF Group Ltd (ASX: MNF)
Another small cap to watch is MNF. It specialises in the Voice over Internet Protocol (VoIP) technology which is used to support services like teleconferencing, online business meetings, and digital data transfers.
Demand has been strong for its services, particularly during the pandemic. This is thanks to favourable tailwinds such as working from home. In addition to this, the NBN rollout and removal of telephone lines is driving VoiP adoption.
Combined with its international expansion and strong balance sheet that allows for potential acquisitions, MNF appears well-placed to continue growing at a solid rate over the long term.
Morgan Stanley is positive on the company. It currently has an overweight rating and $6.30 price target on its shares.
