Do you have a higher than average tolerance for risk? If you do, then it could be worth checking out the small cap ASX stock in this article.
That's because analysts at Bell Potter have just initiated coverage on its shares with a buy rating and are tipping huge returns.
Which small cap ASX stock?
The small cap that Bell Potter has named as a buy is Biome Australia Ltd (ASX: BIO).
It develops, licenses, commercialises and markets innovative, evidence-based live biotherapeutics (probiotics) and complementary medicines. The company notes that many of these are supported by clinical research.
At the last count, Biome Australia was marketing 18 products under the Activated Probiotics brand.
According to the note, Bell Potter believes the small cap ASX stock is well-placed to grow materially in the coming years. It commented:
We have strong conviction in the potential of BIO to grow into a material business through a combination of: 1) differentiation through condition-specific probiotic strains / formulations; 2) more efficient delivery system through microencapsulation and blister packaging; 3) a training and education focused sales model that builds trust, deep customer relationships and brand value; 4) clinical evidence based products that drives credibility and opens up significant potential for co-prescribing of medications; and 5) international expansion to replicate the Australian model.
Bell Potter is expecting this to underpin revenue of $12.7 million in FY 2024, $18,9 million in FY 2025, and then $26.6 million in FY 2026.
As for earnings, a net loss of $2.4 million is expected this year, then profits of $0.3 million in FY 2025 and $3.2 million in FY 2026.
Big returns
Bell Potter has initiated coverage on the small cap ASX stock with a buy rating and 73 cents price target.
Based on its current share price of 50.5 cents, this implies potential upside of approximately 45% for investors over the next 12 months.
Its analysts think that investors should snap up its shares and gain exposure to "BIO's exciting growth phase." The broker concludes:
We initiate coverage of BIO with a BUY recommendation and Target Price of $0.73 / sh. BIO provides rare exposure to the global probiotics market that leverages off the theme of preventative health. Investors can gain exposure during BIO's exciting growth phase as the business moves through breakeven into profitability and positive cash flow. Expansion into the UK and Canada should also drive material improvement in performance.
