Small caps are often where the biggest returns come from — quietly compounding away behind the scenes until the rest of the market catches on.
And right now, Gentrack Group Ltd (ASX: GTK) might be one of the most compelling small caps flying under the radar.
With a sharp focus on modernising utility billing and customer management, backed by structural tailwinds in energy and infrastructure transformation, it could be one to buy for the long term.
Why is it a small cap ASX stock to buy?
Gentrack isn't new to the scene. Founded in 1987, this small cap ASX stock has spent almost four decades providing specialist billing and CRM solutions to utility providers, energy retailers, and adjacent industries like water and airports.
But what makes Gentrack so interesting today is how it has reinvented itself to meet a once-in-a-generation shift in the global energy system.
With the rise of renewables, residential battery storage, and decentralised energy, the complexity of managing data, billing, and customer engagement for utilities has exploded. Traditional platforms were never designed for this world — and many energy retailers are now facing costly technical debt as they scramble to modernise.
Gentrack's answer? A cutting-edge solution known as g2.0, built in partnership with Salesforce and Amazon AWS. This cloud-native platform allows utilities to launch new customer propositions quickly, reduce their cost to serve, and manage complex data in real time — all while improving the end-user experience.
In short, Gentrack is positioning itself as the go-to partner for utilities navigating the clean energy transition. That's a megatrend with a long runway ahead.
Bullish broker
The team at Bell Potter is very bullish on this small cap ASX stock. In fact, the broker has named it on its Australian Equities Panel.
These are its favoured ASX stocks that it believes "offer attractive risk-adjusted returns over the long term." The broker notes that when making its picks it considers "the current macro-economic backdrop and investment environment, focusing on quality companies with proven track records, strong management teams and competitive advantages."
According to the note, the broker has put a buy rating and $13.50 price target on its shares. Based on its current share price, this implies almost 25% upside for investors over the next 12 months. It said:
We are bullish on GTK's ability to maintain customer win momentum in both ROW and Core markets, supporting high NRR revenues, flow on ARR, but masks 'true' EBITDA margin during growth phases.
Customer win momentum is underpinned by rapidly shifting energy consumption and production trends, driving increased complexity within the grids which is meeting technical debt within legacy billing platforms. We note some risk to FY25 forecasts relating to phasing of contract wins v. revenue recognition, though anticipate any pushed back revenues to be captured in FY26.
