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 they are highly rated:
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Universal Store Holdings Limited (ASX: UNI)
The first 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 shift in consumer spending, Universal Store was a very strong performer in FY 2021.
For example, for the 12 months ended 30 June, the company reported a 36.1% increase in sales to $210.8 million. And thanks to a 210 basis point increase in its gross margin, its profits grew even quicker over the year. Universal Store reported an 87.7% jump in underlying net profit after tax to $30.4 million.
In response to its full year results, the team at Morgans retained their add rating and lifted their price target to $8.72. While it acknowledges that lockdowns will impact trading in the short-term, it notes that demand quickly recovers in this category (and for the company in particular) once restrictions ease.
Volpara Health Technologies Ltd (ASX: VHT)
Another small cap ASX share to look at is Volpara Health Technologies. It is a healthcare technology company with a focus on the early detection of breast cancer by improving quality of screening using artificial intelligence.
Volpara's Oxford University-deveoped technology has been designed to provide objective data on breast tissue density. This is a key risk marker for breast cancer.
The company has been growing its market share in the United States at a strong rate and appears well-placed to continue this trend in the future. This is thanks to its quality, recent acquisitions, and the increasing awareness of the importance of breast tissue density.
Morgans is also very positive on Volpara. It currently has an add rating and $1.87 price target on the company's shares.
