If you're looking for big returns, then it could be worth checking out the small side of the market.
That's because in exchange for higher risk, investors have the potential for higher rewards.
For example, the small-cap ASX share in this article has been tipped to provide investors with a return that is more than double the historic market return.
Let's see what analysts at Bell Potter are saying about this small cap.
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Which small-cap ASX share is a buy?
According to a note out of Bell Potter, following a change of analyst, the broker has reaffirmed its buy rating and 29 cents price target on Capitol Health Ltd (ASX: CAJ) shares.
Based on its current share price of 24.5 cents, this implies a potential upside of 18% for investors over the next 12 months.
In addition, the broker is expecting the medical imaging company to pay fully franked dividends of 1 cent per share in FY 2024, FY 2025, and FY 2026. This will mean dividend yields of 4.1% each year, boosting the total potential return to over 22%.
To put that into context, a $10,000 would be worth approximately $12,200 in 12 months if Bell Potter's recommendation proves accurate.
It is also more than double the historical return of the share market, which sits at around 10% per annum.
Why is it bullish?
The note reveals that Bell Potter has boosted its revenue estimates for the coming years. This is to reflect the normalising of volumes and pricing growth rates. And while the broker expects inflationary pressures to weigh on margins in the near term, it appears to believe that this is more than priced into the small-cap ASX share's valuation at present. It commented:
On the transfer of coverage, we have reviewed our earnings estimates. Across FY24e – FY26e, we have increased our revenue estimates by c.1.6% / c.4.7% / c.7.9% driven by normalising volume and pricing growth rates across DI Services and Benefits. However, we expect inflationary pressures to dampen the recovery in operating margins and a lower plateau than previous estimates with margins levelling out at c.22% by FY28e.
This leads to a cut in earnings expectations of c.-8% / c-4.8% / c.- 13.4%. We have upgraded our blended DCF / EV / EBITDA valuation by c.3.6% to $0.29 / sh, reflecting adjustments in our valuation parameters. Catalysts for the share price include continued positive momentum in the Medicare data and M&A activity.
