I think this ASX small-cap share can soar in 2024

This stock could keep travelling higher over time.

| More on:
A young woman makes an online travel booking as she sits on some steps with her suitcase next to her.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Siteminder Ltd (ASX: SDR) share price has climbed 20% over the past six months. I think it's one ASX small-cap share to watch for the long term, and there are good reasons why 2024 could be an exciting year.

Siteminder describes its software as "the only platform that unlocks the full revenue potential of hotels" and an "all-in-one hotel management software that makes the lives of small accommodation providers easier".

It has offices in Bangalore, Bangkok, Barcelona, Berlin, Dallas, Galway, London and Manila and generates more than 115 million reservations worth over $70 billion in revenue for its hotel customers annually, according to the company.

Strong growth

The company is seeing growth in a number of different metrics, which are all contributing to its overall growth. Proof of its success is coming out with the numbers.

It recently reported its FY24 first-half numbers which showed total revenue growth of 27.9% to $91.7 million, with subscription revenue rising 23.8% to $60.3 million and transaction revenue jumped 36.5% to $31.4 million.

Annualised recurring revenue (ARR) rose 27.2% to $182.5 million in the half-year update.

Siteminder advised the number of customer properties increased 13.7% to 41,600. More hotels boost the number of potential transactions that can occur.

But it will take a full 12 months for the business to display its 12-month revenue potential, so the next year already has more growth baked in for the ASX small-cap share.

The ASX small-cap share's profitability is rapidly improving

Siteminder is still making negative cash flow, but the ratio to sales is rapidly improving and looks very promising. In the second quarter of FY24, it saw negative underlying free cash flow of 7% of revenue (being negative $3.1 million), which was an improvement from 28.4% in the same period last year.

The company expects to be profitable in the second half of FY24 for both underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and underlying free cash flow.

Siteminder pointed out that its growing margins reflected the scalability of the business and disciplined cost management.

The company's rapidly growing revenue should help its profit margins in the coming years.

I think reaching breakeven could be a strong catalyst for the company.

Strong outlook

The business is steadily investing in creating new offerings for subscribers, which can help increase loyalty, deliver more growth for subscribers and create revenue for itself.

It's targeting organic revenue growth of 30% in the medium term. Any business compounding at that rate for a number of years will naturally grow into a bigger company.

With an annual recurring revenue (ARR) of $182.5 million already, it appears to have a good growth outlook for at least the next 12 months.

While I wouldn't call the ASX small-cap share cheap, I think it has lots of growth potential with its own financials and for shareholders.

Motley Fool contributor Tristan Harrison 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 SiteMinder. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Opinions

3 ASX shares that could walk away winners from the 'Future Made in Australia Act'

Life is a whole lot easier when money is being thrown your way.

Read more »

Two excited woman pointing out a bargain opportunity on a laptop.
Dividend Investing

With 8%+ dividends, how long can these ASX 200 passive income shares stay cheap?

I think ASX 200 investors looking for ‘cheap’ passive income shares will want to check these out.

Read more »

A smiling woman puts fuel into her car at a petrol pump.
Dividend Investing

Where I'd invest $5,000 in ASX shares now for $1,000 of dividend income

The ASX offers a rich hunting ground for dividend income.

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Opinions

Why I'd buy this ASX 200 stock (even if we're heading for a market crash)

I am a big fan of this business, which is why I recently invested.

Read more »

A man wearing 70s clothing and a big gold chain around his neck looks a little bit unsure.
Gold

Is it a bad idea to buy ASX gold ETFs at all-time highs?

Some trains shouldn't be caught after they leave the station...

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
Opinions

Shares vs. property: What $100 invested in 1926 is worth now

AMP chief economist Dr Shane Oliver gives us the answer.

Read more »

A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.
Opinions

Where I'd invest $5,000 in April 2024

I'd opt for a safer bet with $5,000 this April.

Read more »

A woman sits on sofa pondering a question.
Opinions

Are Coles or Fortescue shares a better buy for dividend income?

Both of these stocks are compelling picks for dividends.

Read more »