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

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

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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.

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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.

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