2 very exciting small cap ASX shares to buy: analysts

What some small caps in your portfolio? Check out these stocks.

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If you have a higher tolerance for risk, then it could be worth considering a little exposure to the small side of the market.

After all, the potential returns on offer from small-cap ASX shares can really give a portfolio a boost.

But which small-cap ASX shares could be worth considering? Two that analysts rate as buys are listed below. Here's what you need to know about them:

Data#3 Limited (ASX: DTL)

Data#3 is a leading Australian IT services and solutions provider focused on helping its customers solve complex business challenges through the use of innovative technology solutions.

Goldman Sachs is very positive on the company and sees it as a small-cap ASX share to buy. The broker highlights its backlog of high-margin orders, attractive valuation, and strong long-term growth outlook. Goldman explains:

As the relatively high-margin backlog converts over CY23, and Services revenue growth outpaces Software, we believe that group GP margins can grow in FY23E and into FY24E. […] Valuation is attractive in the context of DTL's position as a leading beneficiary of increased IT spending in Australia across structural growth areas of software, IT services and cloud/networking infrastructure. NTM P/E of 23x compares favourably to a +21% FY22-25E EPS CAGR, particularly when considering DTL's defensive government exposure.

Its analysts have a buy rating and a $9.30 price target on its shares.

Janison Education Group Ltd (ASX: JAN)

Another small-cap ASX share that has been named as a buy is Janison. It operates in the online enterprise learning and digital assessment segments of the education technology sector.

Bell Potter is a fan of the company and has been pleased with a recent shift in its focus. It said:

JAN has continued to transition away from developing bespoke assessment software for large enterprises and towards providing standardised SaaS platforms, assessment content and delivering high-stakes, high-volume digital exams. As a result, the company has gained scale benefits from an improved customer and product mix and higher-margin, recurring contractual revenues.

The broker currently has a buy rating and 70 cents price target on its shares.

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. has positions in and has recommended Janison Education Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Janison Education Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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