3 high risk, high reward small cap ASX shares named as buys

Here is a group of small cap shares to watch…

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The small end of the Australian share market is home to a number of companies with the potential to grow materially in the future.

Three that investors might want to get better acquainted with are listed below. Here’s why they should be on your watchlist:

Adore Beauty Group Limited (ASX: ABY)

The first small cap ASX share to look at is Adore Beauty. This week the company released its half year results and revealed an 18% increase in revenue to $113.1 million. This was driven by a 13% increase in active customers to 876,000 and strong returning customer growth. And while there are concerns about its slender margins, management appears confident they will improve at scale. It also believes the company “is well positioned to capture market share in a large and growing market benefitting from structural tailwinds.”

Morgan Stanley remains positive on the company. It currently has an overweight rating and $4.00 price target on its shares.

Booktopia Group Ltd (ASX: BKG)

Another small cap ASX share to watch is Booktopia. This online book retailer has been growing at an explosive rate in recent years. This has been driven by the shift to online shopping and supported by the opening of its new distribution centre. The latter is allowing the company to capture heightened demand and ship more books than ever.

While its shares are out of favour with investors at present, Morgans remains positive. It recently put an add rating and lofty $2.78 price target on its shares. This is more than double the current Booktopia share price.

Whispir Ltd (ASX: WSP)

A final small cap ASX share to watch is Whispir. It is a software-as-a-service company that provides a communications workflow platform that automate interactions between organisations and people. The company notes that its offering enables organisations to improve their communications through automated workflows to ensure stakeholders receive accurate, timely, useful and actionable insights. Among its users are the Australian Government, Changi Airport, Monash University, Nespresso, and Takata. Management estimates that it has a total addressable market of US$4.7 billion in just the United States market.

Canaccord Genuity is bullish on Whispir. It has a buy rating and $3.50 price target on its shares. It feels that the company’s shares could rerate once it demonstrates growth in North America.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Whispir Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited and Booktopia Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited and Whispir 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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