I think there are a number of exciting, quality small cap ASX shares that I'd be happy to buy with $3,000 right now.
Smaller businesses have the potential to generate much stronger earnings growth over the medium-term because they're starting from a smaller base.
Here are some of the most exciting (and non-tech) ASX small cap shares that I'd buy with $3,000.
City Chic Collective Ltd (ASX: CCX)
City Chic is one of the most promising ASX retail shares in my opinion. It's a seller of clothes, footwear and accessories for plus-size women.
The company has been growing internationally very well over the past few years, organically as well as through acquisitions. City Chic reported that in FY20 it achieved sales revenue growth of 31% to $194.5 million with comparable sales growth of 0.4%. Not bad during a global pandemic.
The small cap ASX share saw its percentage of online sales increase to 65% of total sales (up from 44% in FY19). Online sales surged 113.5% compared to FY19.
Plenty of retailers on the ASX are focused on Australian (and New Zealand) sales. In FY20 the clothes retailer saw 42% of its global sales come from the northern hemisphere (up from 20% in FY19). It's a global retailer with sales in Europe and North America.
I think the acquisitions are smart and could lead to attractive synergies and market share growth in FY21.
At the current City Chic share price it's trading at 20x FY23's estimated earnings.
Australian Ethical Investment Limited (ASX: AEF)
Australian Ethical is a fund manager that aims to give investors exposure to 'ethical' investments by excluding a number of industries like coal and so on. It also likes to invest in businesses which are making a positive impact on the world.
I like that it's benefiting from two key trends. The first is that it's exposed to superannuation because it's a superannuation provider. In the first quarter of FY21 it saw $100 million of net inflows for the quarter to super. Mandatory super contributions will help Australian Ethical's funds under management (FUM) grow steadily over the coming years. It also offers managed funds which is seeing net inflows.
The small cap ASX share is also benefiting from the growth of some investors wanting to be invested in ethical businesses that are doing good for the country or even the world.
With Australian Ethical's FUM growing by 6.5% in the first quarter alone, I think it has plenty of growth potential. Lowering management fees could help attract more FUM and members over the coming years. The FY20 result was solid with revenue and underlying profit growing by 15%.
BWX Ltd (ASX: BWX)
Natural beauty is another industry that is seeing growth. Beauty as a whole is/was doing well, but natural beauty is growing at a faster pace.
BWX is a business that owns a variety of natural beauty brands. It owns Sukin (which grew revenue by 55% in FY20), which is a large, global brand which is expanding nicely in the northern hemisphere.
The small cap ASX share also owns two US-based brands called Andalou Naturals (which grew revenue by 10% in FY20) and Mineral Fusion (which grew revenue by 16% in FY20) which are growing strongly in the US and are now looking to expand internationally.
Nourished Life is a website that sells a variety of products. It saw revenue growth of 15% in FY20, though revenue grew by 26% in the second half of the year.
There is a lot of things to like about BWX. It's also looking to build a new manufacturing hub that will hopefully help the business lower costs, improve efficiencies and help BWX become a bigger business. It's growing profit margins and this will help it become more profitable.
In FY21 it has guided that both revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) can grow by at least 10%.
At the current BWX share price it's valued at 21x FY23's estimated earnings.
