Having some exposure to the small side of the Australian share market can be a good thing for a balanced investment portfolio.
After all, if you can identify a small-cap ASX share with the potential to become a mid-cap or even a blue-chip one day, the returns can be significant.
But which small caps could be in the buy zone right now? Let's take a look at two that analysts at Morgans are recommending to clients with a higher than average tolerance for risk. They are as follows:
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Camplify Holdings Ltd (ASX: CHL)
Morgans thinks that Camplify could be a small-cap ASX share to buy.
It operates one of the world's leading peer-to-peer digital marketplace platforms, connecting recreational vehicle (RV) owners to hirers. The company has operations in Australia, New Zealand, Spain, the UK, Germany, Austria, and the Netherlands.
Morgans was pleased with Camplify's performance during the first half, highlighting its lower operating costs and stronger unit economics. It said:
CHL's 1H26 result highlighted the ongoing transition underway within the business, with lower opex and stronger unit economics from the MyWay mutual and membership-led strategy. Whilst GTV decline (-17%) was a result negative, we acknowledge some of the contraction was due to CHL deliberately pulling back low-margin volume. CHL Revenue of ~A$19m was ~5% down on the pcp, With the seasonally stronger period now underway, a deeper ANZ partnership funnel (JB Group) and future bookings of ~A$32m at period-end, we expect the business to have an improved half-on-half performance.
In response, the broker has retained its buy rating with a reduced price target of 78 cents. This implies potential upside of over 100% for investors.
Readytech Holdings Ltd (ASX: RDY)
Another small-cap ASX share that has caught the broker's eye is Readytech.
It is a leading provider of mission-critical SaaS for the education, employment services, workforce management, government and justice sectors.
Morgans remains positive despite Readytech's half-year results coming in softer than expected. It said:
RDY's 1H26 result and revised outlook came in softer than expected, with Underlying EBITDA of $17.5m / Cash EBITDA of $7.5m ~6% behind MorgF. Whilst RDY's enterprise strategy remains on track, the group indicated that increased churn in 1H26 along with more protracted implementation/sale conversion have led to an FY26 guidance downgrade and the withdrawal of its longer-term targets. Whilst we downgrade our FY26-17 EBITDA forecasts by 10-20% reflecting revised guidance, given RDY's robust pipeline, potential catalysts (VIC TAFE decision and likely increased corporate appeal), we move to a SPECULATIVE BUY rating, with a revised price target of $2.20/sh (previously $3.00/sh).
As mentioned above, Morgans has put a speculative buy rating and $2.20 price target on its shares. This suggests that upside of 80% is possible between now and this time next year.
