It wasn't that long ago that tech stars Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) could have been classed as small cap shares.
Today they are $3.3 billion and $1.5 billion companies and their long-term shareholders have been rewarded handsomely.
While not all small cap tech shares are destined to follow in their footsteps, I do think the three listed below have a lot of potential. Here's why:
Citadel Group Ltd (ASX: CGL)
Although this software and services company's shares have been on fire this year, I don't believe it is too late to consider an investment. Citadel is a specialist in IT security and data management and a company which I believe has a bright future ahead of it. Especially given the growing amount of data being generated by businesses and how important it is to keep it secure. Citadel looks set to benefit from this trend due to the growing popularity of its Citadel-Information Exchange (Citadel-IX) cloud-based enterprise information management platform. This platform allows users to securely access and transfer proprietary and sensitive information remotely.
ELMO Software Ltd (ASX: ELO)
ELMO is a leading provider of integrated cloud-based human resources and payroll software solutions. Over the last 18 months the company has been outperforming expectations and this has been reflected in its share price. Its shares are up 149% since this time last year. The good news is that I believe ELMO still has a long runway for growth ahead of it, which makes it worth considering even after this stellar gain. In FY 2018 ELMO achieved pro forma revenue of $31.9 million and pro forma SaaS revenue of $29.8 million. Which is still only a small slice of the addressable market in Australia and New Zealand estimated to be worth upwards of US$770 million per year by management.
Serko Ltd (ASX: SKO)
Serko is a provider of travel and expense technology solutions to a growing number of companies including industry giant Flight Centre Travel Group Ltd (ASX: FLT). The company recently signed a letter of intent with Flight Centre to develop unique product offerings based on Serko's travel management technology. I believe this is a testament to the quality of its offering and expect it to support its strong sales growth. Serko's management expects revenue growth of up to 30% in FY 2019.
