If you have a higher than average tolerance for risk, then it could be worth considering a few small cap ASX stocks for a balanced portfolio.
That's because the potential returns on offer at the small end of the market can be material. Though, it is always worth remembering that this greater reward brings greater risk.
With that in mind, let's take a look at two small cap ASX stocks that have recently been named as buys and tipped to rise strongly from current levels. Here's what you need to know about them:
Aroa Biosurgery Ltd (ASX: ARX)
This morning, Bell Potter reiterated its buy rating on small cap ASX stock Aroa Biosurgery.
It is a wound repair specialist company that uses a decellularised extra cellular matrix derived from ovine (sheep) gut.
Bell Potter has been impressed with the company's performance in FY 2024 and expects more of the same in FY 2025. Despite this, it trades at a discount to peers. The broker explains:
ARX is likely to deliver strong double digit percentage growth in FY25 and it is trading at a heavy discount to peers. Other than earnings, important catalysts include the headline data from pending scientific papers regarding the ongoing MASTRR study for Myriad in the treatment of trauma, limb salvage and colorectal surgery. The investment in these studies has been significant and we believe will have a long shelf life. The sales force is now well established and poised to take advantage of these important data releases.
Bell Potter has put a buy rating and 90 cents price target on its shares. This suggests that upside of 30% is possible over the next 12 months.
Camplify Holdings Ltd (ASX: CHL)
A second ASX small cap stock that has been given the thumbs up by analysts this month is Camplify.
It operates one of the world's leading peer-to-peer digital marketplace platforms, connecting recreational vehicle (RV) owners to hirers. It has operations in Australia, New Zealand, Spain, the UK, Germany, Austria and Netherlands.
Morgans continues to believe that the market is thoroughly undervaluing the company's shares. It likes Camplify due to its positive long term growth outlook, which is being underpinned by its large opportunity both at home and abroad. The broker recently 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 just put an add rating and $2.10 price target on its shares. This is more than double where they trade today.
