You only need to look at the performance of the S&P/ASX Small Ordinaries index to see this.

It is up 22% year to date, whereas the S&P/ASX 200 index is only up 7.4%.

But which small cap ASX stocks could be worth considering? Let's take a look at two that Morgans is positive on. They are as follows:

Atturra Ltd (ASX: ATA)

The first small cap ASX stock that Morgans has been looking at is Attura.  It is a technology company providing a range of enterprise advisory, consulting, IT services, and solutions to local government, utilities, education, defence, federal government, financial services, and manufacturing industries,

It recently revealed the immediate termination of a fixed term contract with an Australian public sector body. While this is disappointing, Morgans believes that significant share price weakness since the announcement has created an opportunity for investors. It said:

ATA have announced a contract dispute which will negatively impact its FY26 and its 1H26 result. Management commented that "Atturra does not have a history of disputes or termination of material contracts and views this as a one-off occurrence. ATA's balance sheet remains strong, and the Company sees no ongoing impact from this purported termination." We agree and see this as a largely one-off event. We reduce our forecasts in line with guidance which lowers our TP to 80cps (was 95cps).

Morgans has an accumulate rating and 80 cents price target on its shares. This implies potential upside of 21% for investors over the next 12 months.

PeopleIn Ltd (ASX: PPE)

Another small cap ASX stock that Morgans is positive on is PeopleIn. It is a workforce solutions company servicing over 4,000 businesses.

It focuses on high-demand and defensive employment sectors including engineering, trades and labour, food services and agriculture, technology, finance, corporate services, education and defence.

Morgans was pleased with the company's decision to divest businesses and believe it will create higher quality earnings. It explains:

PPE has now divested two businesses as it, refocuses on its core competencies, being Queensland infrastructure, food and agriculture, defence and professional services. Whilst the divestments have been opportunistic and at healthy earnings multiples, the impact has been dilutionary to EPS. Offsetting the lower EPS, the residual business should prove higher quality (and higher growth), as the business looks beyond what is approaching cyclically low earnings.

To this end, we continue to see earnings growth driving share price appreciation through FY27/28, with any turnaround unlikely to be visible until 4QFY26. Hence, we reiterate our Speculative Buy rating with a $1.10/sh price target.

Morgans has a speculative buy rating and $1.10 price target on its shares. This implies potential upside of 25% over the next 12 months.

The post Morgans names 2 small cap ASX stocks to watch appeared first on The Motley Fool Australia.

Four ASX shares that are rising more than most today are listed below. Here's why they are storming higher:

Atturra Ltd (ASX: ATA)

The Atturra share price is up 7% to 78.2 cents. Investors have been buying this technology services company's shares after it announced an agreement to acquire Exent Holdings. Attura is paying $6 million in upfront consideration with earn-out/post-completion consideration of up to $2 million in cash. Management notes that it is a strategically aligned acquisition that helps Atturra extend its advisory and consulting capabilities outside of Canberra and Defence and expand the practice nationally. The transaction is expected to complete on or around 31 July.

Bravura Solutions Ltd (ASX: BVS)

The Bravura Solutions share price is up almost 5% to $1.12. This follows the release of a guidance update from the wealth management software solutions company. Bravura advised that it is upgrading its FY 2024 EBITDA guidance to approximately $25 million. This is up from its previous guidance range of $18 million to $22 million. Management advised that its upgraded guidance follows a successful transformation execution over the course of the year which has resulted in the stabilisation of the business and continued progress towards rightsizing the cost base.

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 9% to 12 cents. Investors have been buying this lithium miner's shares this month following a couple of positive updates. One was the release of an update on its production in FY 2024. Core Lithium advised that it exceeded its FY 2024 production guidance with production of 95,020 dry metric tonnes (dmt) of spodumene concentrate. This led to Core Lithium reporting an unaudited cash balance of $87.6 million at 30 June. Also going down well with investors was the release of the company's exploration update last week.

Opthea Ltd (ASX: OPT)

The Opthea share price is up 8% to 40 cents. This morning, the clinical-stage biopharmaceutical company revealed that it has successfully completed the fully underwritten retail component of its entitlement offer. The retail entitlement offer raised approximately A$55.9 million, which brought the total raised to a whopping A$227.3 million at 40 cents per new share. The net proceeds will fund the company through the anticipated Phase 3 topline data readouts for COAST (Combination OPT-302 with Aflibercept Study), and ShORe (Study of OPT-302 in combination with Ranibizumab). In addition, the funds are intended to be used to progress chemistry, manufacturing, and controls activities, Biologics License Application preparations for FDA approval, and for general corporate purposes.

The post Why Atturra, Bravura, Core Lithium, and Opthea shares are racing higher today appeared first on The Motley Fool Australia.

At the time of writing, the ASX tech share is up a massive 32% to 5.4 cents.

Why is this ASX tech share rocketing?

Investors have been scrambling to buy the information technology solutions company's shares today after it received and accepted a takeover approach.

According to the release, larger rival Atturra Ltd (ASX: ATA) has tabled a 5.3 cents per share offer to acquire Cirrus Networks. This represents a 29.3% premium to its last close price and values the company at $49.3 million.

Cirrus Networks shareholders will be given the opportunity to elect either 75% cash and 25% shares, 100% cash, 50% cash and 50% shares, or 100% shares. However, this is subject to a scale-back mechanism to achieve an overall approximate 75% cash/25% shares mix.

This offer has been accepted by Cirrus Networks and the two parties have entered into a scheme implementation deed. The ASX tech share's board unanimously recommends that shareholders vote in favour of the scheme, and each director intends to vote all shares controlled by them in favour of the scheme. This is in the absence of a superior proposal and subject to the independent expert's report.

Why is Atturra acquiring Cirrus?

Atturra's CEO, Stephen Kowal, believes there are strong strategic reasons to acquire Cirrus. He explains:

The acquisition of Cirrus has strong strategic and cultural alignment with Atturra's industry and service capabilities and is a positive step towards Atturra's vision to be Australia's leading advisory and IT solutions provider. Cirrus will significantly expand Atturra's recurring managed service capabilities and will provide an enlarged and complementary client base with significant future cross-sell opportunities.

Cirrus brings a wealth of expertise in the government and energy & resources industries, having serviced some of the leading names across these sectors respectively, enhancing Atturra's ability to become a market leader in these sectors. We look forward to working with and welcoming the Cirrus team to Atturra.

The post This ASX tech share is leaping 32% today amid a takeover deal appeared first on The Motley Fool Australia.

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, 1851 Capital portfolio manager Martin Hickson names three ASX shares investors should buy that drove strong returns for his fund.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Martin Hickson: I'm Martin Hickson, portfolio manager at 1851 Capital, a reasonably newly established business and fund. 

We launched the fund back in February 2020. Both Chris Stott, who's my partner in the business, worked together previously at Wilson Asset Management for a decade together before setting up this business. 

Our style is we're a long-only small and micro-cap fund manager. We've got restricted capacity. We soft-closed the fund at $400 million back in August last year. From the launch, that was always the plan, to soft-close the fund once we got to that level. It's our belief that as you grow your funds under management past a certain point, it starts to inhibit performance, so that's why we've restricted the capacity of the fund. 

We invest in companies ex-S&P/ASX 100 Index (ASX: XTO) industrial companies, ASX-listed only. There's no pre-IPO or overseas companies, [no] unlisted assets. Our style is we're looking for growth companies with attractive valuations and a catalyst that can re-rate the share price.

MF: This year's been a tough time for smaller caps, hasn't it? How do you see things at the moment, and where do you see them going?

MH: Yeah, it has been a volatile time. The area of the market that we invest in, the small industrials, since we launched the fund just under three years ago, our area of the market's actually down by 15% over the first 33 months of launching the fund. [But] the fund's done okay. As of the end of October… from memory, it's up around 35%. 

It's been a tough 12 months, and it's been a very volatile almost three years for markets. Since we've launched the fund, we've been through two bear markets now, and a potential recession coming. We've been through the COVID pandemic, obviously a war, so there's a lot that's occurred in the first three years of the fund.

Hottest ASX shares

MF: What are the three best stock buys right now?

MH: The three stocks that I'll talk about, they're all companies that we own within the portfolio and at the smaller end of the overall market.

The first one is a company called IPD Group Ltd (ASX: IPG). A reasonably new entrant to the ASX, so listed back in December last year. It's been a strong performer. The share price has more than doubled over the last 12 months. 

What they do is they're an electrical equipment distributor and services company. If you go into a big apartment building or an office, you look at the electricity distribution room, and you see all the equipment in there, a lot of the equipment has likely come from a company like IPD Group. So power distribution, power monitoring, industrial control products.

It's been a very successful position for us. Despite the strong performance in the share price, it still trades at an attractive valuation — so they're 15 times price-to-earnings ratio, so quite cheap, below what the overall market's trading at. Their earnings are growing at over 20%. So very, very strong growth, but still trading at that cheap price. 

They extended their agreement with ABB Ltd. ABB is one of the largest electrical equipment manufacturers globally, with 30% market share. [IPD is] distributing all of those products in Australia on behalf of ABB.

The other thing we like about it is that they've got a growing EV business. They sell the equipment to install EV chargers in both residential homes but also in EV charging stations. They're one of the only ways to get exposure to that growing electronic vehicle thematic in the industrial space. There's obviously lithium, but this is one of the only ways to play it on the ASX in the industrial space. 

That's one that's performed strongly for us, but we still think there is further upside to that company.

Thirdly, they've got a strong balance sheet. They've got $25 million of net cash on the balance sheet, and that provides flexibility to potentially deploy that cash into acquisition opportunities.

MF: Fantastic performance, isn't it? It's not an energy company or a mining company, but it's more than doubled this year when everything else has flopped.

MH: Yeah, that's right. It's doubled in a period where the overall market's down just over 20%, so a lot of good tailwinds for that business.

MF: Great, your next stock to buy right now?

MH: Next one's a company called Atturra Ltd (ASX: ATA). They're an IT services company.

Similar to IPG, really. There's a lot of similar characteristics. They also listed around 12 months ago. We participated in the [initial public offering] IPO. It trades at a price-to-earnings ratio of 15 times, earnings rate 20% as well. And again, [a] very strong balance sheet — $30 million net cash on the balance sheet, similar to IPG. It gives them flexibility to potentially deploy that cash into accretive acquisitions. 

They've also given earnings guidance to the market back in August of $15 to $16 million of EBIT. We think that looks conservative. We think their earnings are growing at a very fast rate, but again, it's still trading at quite a reasonable multiple.

MF: You would think listing at the end of last year would be absolutely terrible timing, but both those companies have done really well.

MH: Yeah. If you look at the overall list of companies that IPOed in the second half of last calendar year, in that December half, there aren't many of them that have performed strongly. A lot of them are well underwater, but both IPD Group and Atturra have bucked the trend. They're up significantly since their IPO. 

Even in any market, in the micro-cap and small-cap space, there are always opportunities to find these gems that grow irrespective of what's happening in the overall economy.

MF: And your third pick, I think, is a bit more of a mature player?

MH: Yeah, the third is Capitol Health Ltd (ASX: CAJ). They're a radiology company. There's a couple of reasons why I like it. 

Firstly, their earnings are recovering post the COVID disruptions of the last couple of years. Their business is primarily in Victoria, so they were significantly impacted by the lockdowns there over the last few years, so they've seen a tailwind for their earnings this financial year. 

Justin Walter, the CEO there, who's been CEO for three years, has changed the business a lot since he joined. He's taken significant costs out of the business, he's improved the culture of the organisation, and also, in August this year, they acquired one of their competitors in Victoria, a business called Future Medical Imaging Group. That was an accretive acquisition for them, and it really reinforced that dominant position in the Victorian radiology market.

The other attraction is that it trades on a low EBITDA multiple of 7.5 times. We've seen, over the last couple of years, there have been private transactions where companies have been taken over at EBITDA multiples of 12 to 13 times. So based on those numbers, Capitol Health is trading a lot cheaper than a lot of those private companies were taken over at. That gives it very strong valuation support.

MF: The health industry is also defensive, isn't it, when an economic downturn is coming?

MH: Yeah, that's right, so better earnings streams … Like you say, quite defensive, given they operate in the healthcare space.

The post 3 small-cap ASX shares that drove fund up 35% while the market plunged appeared first on The Motley Fool Australia.

At least, not yet.

Technology companies are often priced with distant future earnings in mind. Meaning they've been particularly vulnerable to rising interest rates, which drive up the present-day cost of investing in those future earnings.

To give you some idea of the headwinds facing ASX tech shares this year, the S&P/ASX All Technology Index (ASX: XTX) is down 31% since the opening bell on 4 January. That's far steeper than the 11% loss posted by the All Ordinaries Index (ASX: XAO).

But not all technology stocks have lost ground in 2022.

Share price up on revenue and earnings growth

Atturra (ASX: ATA) counts among the ASX tech shares bucking the trend, with the share price up 25% year-to-date.

Atturra is a relative newcomer to the ASX, listing on 22 December 2021. The company provides a range of enterprise advisory, consulting, and IT services and solutions to government and corporate entities.

The company released its first FY22 results as a listed entity on 30 August.

Among the highlights, the newly minted ASX tech share reported a 29% year-on-year increase in earnings before interest and tax (EBIT) of $12.4 million.

FY22 revenue reached $134.6 million, up 37% from the prior year. And Atturra held $35 million in cash at hand as at 30 June, with a debt of $4.8 million.

These are among the reasons that 1851 Capital's Chris Stott told Livewire, "We've gone with Atturra," when asked for a microcap stock that can take advantage of the current conditions and "really set itself up for the coming years".

Why this small-cap ASX tech share 'stands out' right now

According to Scott, the recently listed ASX tech share "trades on seven times EBIT… So, it's doing very well in terms of, it's performed well since its listing."

Scott added:

It's got $30 million of net cash on the balance sheet. It's been upgrading its earnings since the listing. So, [a] very well managed little IT services business, off the radar. Not many institutions on the register, not well covered by the stock broking community. So that one stands out for us right now.

How has this ASX tech share been performing?

Up 25% this year to 75 cents per share, the Atturra share price reached all-time highs of 84 cents on 7 June.

Over the past month, the ASX tech share has gained 12%, compared to a 4% loss posted by the All Tech Index.

The post Why this small-cap ASX tech share 'stands out' right now: expert appeared first on The Motley Fool Australia.