ASX small caps are the ones that could become the next Xero Limited (ASX: XRO) or A2 Milk Company Ltd (ASX: A2M).
All the current big businesses like CSL Limited (ASX: CSL) and Transurban Group (ASX: TCL) were small companies at once stage.
I think these three shares could be contenders to be the next small cap shares to reach the ASX 100:
Bubs Australia Ltd (ASX: BUB)
The goat infant formula business is following in the footsteps of its larger peers. Just today it reported is September 2019 quarter, with revenue growth of 58% to $14.2 million.
I've been impressed by the company's choices over the past year. It has entered into a number of seller partnerships here and abroad which should allow for fast revenue growth. It has invested heavily in its supply chain, it owns its own CNCA certified canning facility and it is expanding its product range to include organic grass fed cow formula.
I expect Bubs' profit margins will improve substantially over the next few years, which will boost profit faster than revneue.
Redbubble Ltd (ASX: RBL)
The artist product website business has recovered strongly since its painful decline a year ago.
Redbubble is now generating healthy free cash flow, its operating profit margins keep improving and its revenue grew by 43% in the first quarter of FY20.
It's not going to be the size of Amazon, but it operates in an attractive niche where it could become one of the most well-known names in the industry.
If the profit margins can keep climbing higher then Redbubble could definitely be one to watch over the next 12 months and beyond.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara has technology to enable personalised, high-quality breast cancer screening based on objective measurements of breast density, compression and radiation dose.
It is aiming to reach 27% of US women using a Volpara product on their images and data. It's also looking to increase its revenue per user by offering its full range of Volpara and MRS products.
In the September 2019 quarter Volpara experienced cash receipt growth of 190% compared to the second quarter of its FY19.
It's debt free, growing revenue at a strong range, has a high retention rate, it's growing its market share and has gross margins above 80%. The expansion into lung cancer screening is a useful bonus too.
Foolish takeaway
Each of these shares have very good futures. Redbubble is the furthest along the growth journey. Volpara looks like it could be the best on paper with its high margins and retention rates, but Bubs could be the one to be the biggest business of the three in the future with its large addressable markets.
