2 small cap ASX shares which could have significant upside

These small cap shares could be going a lot higher if this broker is on the money with its recommendations…

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A number of popular small cap ASX shares have underperformed recently. While this is somewhat disappointing for shareholders, it may have created a buying opportunity for others.

Two exciting small cap ASX shares that one leading broker believes have significant potential upside are listed below. Here's what you need to know about them:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a provider of enterprise mobility software to sales and service organisations.

Its platform pairs functionality with a highly intuitive user interface to provide an advanced content management system, document automation, internal communications, and a fully integrated modern learning management system.

The latter system ensures that the right learning materials are delivered to the right person, at the right time, in the right way. This is ultimately helping users to compete more effectively to produce significantly improved business results, increase sales win rates, reduce expenditures, and improve customer satisfaction.

Judging by its blue chip customer base, which includes Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Nike, its platform appears to be delivering results for users. This is underpinning very strong recurring revenue growth.

For example, Bigtincan recently released its third quarter update and revealed that it is on target to achieve annualised recurring revenue (ARR) at the top end of its FY 2021 guidance range of $49 million to $53 million. This compares to FY 2020's ARR of $35.8 million, representing year on year growth of 36.9% to 48%.

Morgan Stanley currently has an overweight rating and $1.50 price target on the company's shares. This compares to the latest Bigtincan share price of $1.03.

ELMO Software Ltd (ASX: ELO)

Another small cap to look at is ELMO. It is a growing cloud-based human resources and payroll software company that provides businesses in the ANZ and UK markets with a unified platform that streamlines a wide range of everyday processes.

ELMO has been growing at a very strong rate over the last few years and has continued the trend in FY 2021. This is being driven by organic growth and the acquisitions of complementary businesses Breathe and Webexpenses.

ELMO recently released a trading update and revealed that it expects its ARR to be between $83 million and $85 million in FY 2021. This will be up 50.5% to 54.2%, respectively, on FY 2020's ARR of $55.1 million.

While this is a large number, it is still well short of its total addressable market. Management estimates that it has a $12.8 billion opportunity in just the ANZ and UK markets. And with its platform being jurisdiction agnostic, it has the option to expand into other markets with relative ease in the future.

Morgan Stanley is also a fan of ELMO. It recently retained its overweight rating and $9.70 price target on its shares. The ELMO share price ended the week at $4.88.

Should you invest $1,000 in Bigtincan right now?

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended BIGTINCAN FPO and Elmo Software. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO and Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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