If you have a high tolerance for risk, then you might want to consider adding some small cap exposure to your portfolio.
But which small cap ASX shares should you buy? Listed below are two that Morgans rates very highly. Here's why it is bullish on them:
Acrow Formwork and Construction Services Ltd (ASX: ACF)
The first small cap ASX share that Morgans is bullish on is Acrow. It provides engineered formwork, scaffolding, and screen systems solutions to the construction sector.
Morgans likes the company due to its belief that it is well-placed to benefit from growing civil infrastructure activity across the east coast. It also highlights its attractive valuation and even more attractive dividend yield. It said:
ACF is a well-managed business with leverage to growing civil infrastructure activity over the long-term, especially on the east coast. We believe the valuation remains attractive (~7x FY23F PE and ~6.5% yield) with potential positive catalysts from further meaningful contract wins.
The broker has an add rating and 84 cents price target on its shares. This suggests potential upside of 23% for investors over the next 12 months based on the current Acrow share price.
Mach7 Technologies Ltd (ASX: M7T)
Morgans is positive on this enterprise image management systems provider. It believes Mach7 is well-positioned to deliver strong top line growth over the coming years. It explained:
Mach 7 is a provider of enterprise image management systems that allow hospitals to identify, connect and share image and patient care data. Revenue growth of at least 20% pa is expected over the next three years.
The broker currently has an add rating and $1.34 price target on its shares. So, with the Mach7 share price currently fetching 73 cents, this implies potential upside of 83% for investors over the next 12 months.