If you have a higher-than-average 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 three that Morgans rates very highly. Here's why it is bullish and has them on its best ideas list:
Acrow Ltd (ASX: ACF)
The first small-cap ASX share that Morgans is bullish on is Acrow. It provides the construction sector with engineered formwork, scaffolding, and screen systems solutions.
Morgans likes the company due to its positive long-term outlook, attractive valuation, and generous 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. Momentum remains strong and recent acquisitions will provide new avenues for growth, especially in the more stable and less cyclical Industrial Services segment. We believe the valuation remains attractive (~7.5x FY25F PE and ~5.5% yield) with potential positive catalysts from further meaningful contract wins.
The broker currently has an add rating and a $1.43 price target. This implies a potential upside of 25% for investors.
Camplify Holdings Ltd (ASX: CHL)
Another ASX small-cap share that Morgans rates highly is Camplify. It is the number one player in ANZ in the peer-to-peer RV rental space.
The broker believes that Camplify has a significant growth opportunity both at home and abroad. It said:
We expect CHL to continue to grow into its large addressable market locally, with over 790k registered RVs in Australia and ~130k in NZ. CHL only has ~2% of these on its platform. It has broadly doubled its domestic fleet since listing and with its acquisition of Germany- based PaulCamper (PC) now has a total fleet of over 29,000, making it a true global player.
Morgans has an add rating and a $2.85 price target on its shares. This suggests that a potential upside of almost 60% is possible from current levels.
Mach7 Technologies Ltd (ASX: M7T)
Finally, Morgans is also feeling positive about this enterprise image management systems provider and sees it as an ASX small-cap share to buy. Its analysts believe Mach7 is well-positioned to deliver very strong sales growth over the coming years. They said:
Mach7 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 has an add rating and a $1.56 price target on its shares. This implies a massive upside of over 100% for investors.
