Goldman Sachs names 2 small cap ASX shares to buy with 80%+ upside

These small cap ASX shares could be in the buy zone…

| More on:
A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy

Image source: Getty Images

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

Are you a fan of investing at the small side of the market? If you are, then you may want to take a look at the small cap ASX shares listed below that have been tipped as buys by analysts at Goldman Sachs.

Here's why the broker is bullish on these small cap shares:

Hipages Group Holdings Ltd (ASX: HPG)

The first small cap ASX share to consider is Hipages. It is a growing Australian-based online platform and software as a service (SaaS) provider connecting consumers with trusted tradies.

Hipages recently released its fourth quarter update and delivered further solid growth. This went down well with Goldman Sachs, which believes the update points to a rebound in momentum after a tough period. It said:

We view HPG's beat in net new tradies (400 vs GSe of 300) as a positive sign that the momentum in the business is returning; a slowing economy and housing cycle should make the HPG platform incrementally more valuable as a source of work for tradies. We believe difficulties in new tradie additions and elevated churn in previous quarters reflected labour shortages across the industry and are confident a rebalancing in industry supply/demand will see these challenges resolve.

Outside this, the broker has previously suggested that "the opportunity for HPG is similar to REA/CAR, which are now the leading online platforms in their respective industries."

Goldman has a buy rating and $2.55 price target on its shares. Based on the current Hipages share price of $1.40, this implies potential upside of 82% over the next 12 months.

Nitro Software Ltd (ASX: NTO)

Another small cap ASX share that Goldman Sachs is bullish on is Nitro Software. It is a growing software company driving digital transformation in businesses around the world across multiple industries.

It is doing this through its key solution: the Nitro Productivity Suite. This provides integrated PDF productivity and electronic signature tools to customers via a software-as-a-service and desktop-based software solution.

Nitro's shares were hammered last month after the company downgraded its guidance. While Goldman was disappointed with its update, it hasn't changed its view that this is a company with enormous long term growth potential.

Goldman explained:

We see the update as re-basing market expectations on NTO's growth outlook and highlighting the path to breakeven; however, we acknowledge that NTO will likely enter a "show me" phase where consecutive quarters of strong ARR performance are necessary to allay concerns over execution challenges. That said, we continue to see NTO as an undervalued global growth opportunity and highlight that the company now trades at ~12x FY24E EV/EBITDA on a capitalisation-adjusted basis.

The broker has a buy rating and $2.05 price target on its shares. Based on the current Nitro share price of $1.11, this implies potential upside of 85% over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has positions in and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Small Cap Shares

A happy boy with his dad dabs like a hero while his father checks his phone.
Small Cap Shares

Buy these small cap ASX shares for big juicy returns

Analysts have good things to say about these buy-rated stocks.

Read more »

Two kids in superhero capes.
Small Cap Shares

2 small-cap ASX shares I think are great buys right now

These small stocks have big potential, in my opinion.

Read more »

Man with rocket wings which have flames coming out of them.
Small Cap Shares

Guess which small cap ASX stock is rocketing 42% on Mercedes-Benz deal

This small cap is ending the week with a very strong gain.

Read more »

A young man working from home sits at his home office desk holding a cup of tea and looking out the window
Small Cap Shares

These small cap ASX shares could rise 25% to 100%

Analysts are tipping these small cap to rise strongly from current levels.

Read more »

A woman holds a tape measure against a wall painted with the word BIG, indicating a surge in gowth shares
Small Cap Shares

2 ASX shares on track for monster return potential

These ASX shares have a compelling future, in my view.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Small Cap Shares

Which small cap ASX stock is jumping 20% after receiving a takeover offer?

This tech stock could be heading to the NASDAQ after receiving a takeover offer.

Read more »

Blue % sign with white dollar signs.
Small Cap Shares

Buy these small cap ASX shares before interest rates fall

Analysts think these small caps could generate big returns.

Read more »

A woman sits in her home with chin resting on her hand and looking at her laptop computer with some reflection with an assortment of books and documents on her table.
Small Cap Shares

Why I think this ASX penny stock is a bargain at its 52-week low

Things be looking up soon for this underappreciated ASX share, in my view.

Read more »