These 3 small cap ASX stocks could be tomorrow's megastars

Should investors get onboard these small caps before the rest of the market discovers them?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you want to supercharge your investment returns, investors need to bypass the usual blue-chip mega-market capital companies that make up a big percentage of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) and take a closer look at smaller market cap companies.

It's very difficult for companies like Telstra Corporation Ltd (ASX: TLS) or Wesfarmers Ltd (ASX: WES) to double their revenues and earnings in a short period of time, if at all, from where they are currently.

That's not the case with small caps, which can double, triple or quadruple earnings or more, taking their share prices along with them.

Here are three small cap stocks that have the potential to become the billion-dollar stars of the ASX in the future…

Nearmap Ltd (ASX: NEA)

The photomapping company has a market cap of just $176 million today, but expansion into the US (and potentially other countries), as well as domestic organic growth could see this company grow earnings at a rapid rate. Nearmap recently reported its maiden profit, with revenues growing 62% over the previous year.

Unilife Corporation (ASX: UNS)

Unlife develops injectable drug systems and expects to release a number of new products this year. With revenues growing at an astonishing 436% to US$14.7 million in the 2014 financial year, it may not be long before this company is reporting healthy profits. With a market cap of just $286 million, Unilife could be one of the ASX's blue chip stocks before long.

Energy Action Ltd (ASX: EAX)

Energy Action has a market cap of just $80 million today. The company runs the Australian Energy Exchange which allows clients to procure gas and electricity at the lowest possible prices. Energy Action is also an energy broker, securing best energy deals for government businesses and corporations. Energy Action disappointed shareholders with its most recent results, but that could just be a one off. With the share price down 25% since November 2013, this could be an opportunity.

Motley Fool writer/analyst Mike King owns shares in Telstra Corporation and Nearmap. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »