Buy these ASX small cap stocks this week: Goldman Sachs

Goldman Sachs reckons investors should be buying these small caps this week.

| More on:
three women with smartphone technology in European street scene

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

Goldman Sachs has been running the rule over the small side of the retail sector and has picked out three small cap ASX stocks that it thinks are buys.

Here's why the broker is tipping them as top options for investors this week:

Which ASX small cap stocks could be buys?

According to the note, the broker has named three small cap ASX stocks as buys.

These are footwear retailer Accent Group Ltd (ASX: AX1), online furniture retailer Temple & Webster Group Ltd (ASX: TPW), and youth fashion retailer Universal Store Holdings Ltd (ASX: UNI).

Goldman has explained that a number of factors have influenced its decision to name these stocks as buys in the current slowing consumer discretionary environment. It highlights:

We consider which of the discretionary retailers is (1) most exposed to a normalisation in margins; (2) those most resilient from a top line perspective and; (3) where we see valuation support.

The good news is that the three small caps named above tick these boxes for the broker. It adds:

TPW has limited exposure to CODB pressures given its pure-play online presence; we expect a strong competitive position to drive top line momentum (+17% FY23-25E CAGR) as TPW grows its market share of a growing online market; AX1 has resilient top line relative to other discretionary retailers given its predominantly footwear exposure and exposure to high growth global brands. We see upside to consensus estimates driven by margin expansion through secular growth in vertical/distributed brands; UNI has a relatively more favourable younger consumer exposure, an under-penetrated store network and margin upside through Perfect Stranger; with the stock trading on 8x FY24 P/E we believe valuation support limits further downside.

And while an honourable mention goes to fashion jewellery retailer Lovisa Holdings Ltd (ASX: LOV), the broker has concerns over its premium valuation and like-for-like sales expectations. It said:

We prefer Buy rated TPW (on CL)/AX1/UNI which are well-placed to deliver secular growth through market share gains (TPW), store roll out (UNI/AX1) and private label margin upside (TPW/UNI/AX1). LOV also stacks up well under this framework as the business is executing on a global store rollout, however we believe the market remains too optimistic on the outlook for LFL sales growth.

Goldman currently has price targets of $2.80 on Accent shares, $6.40 on Temple & Webster shares, and $5.05 on Universal Store shares.

Should you invest $1,000 in Accent Group Limited right now?

Before you buy Accent Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Accent Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

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 Lovisa and Temple & Webster Group. The Motley Fool Australia has recommended Accent Group, Lovisa, and Temple & Webster Group. 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 man slumps crankily over his morning coffee as it pours with rain outside.
Small Cap Shares

Why this Telstra-linked ASX small cap stock just crashed 90%

This small cap is having a very bad session. What's going on?

Read more »

A young boy wearing a hat, sunnies and striped singlet looks fierce and flexes his arm in victory.
Small Cap Shares

The ASX small-cap stock trading at 'half of the earnings multiple of industry leaders'

A leading fund manager sees a lot of untapped value for this soaring ASX small-cap stock.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Small Cap Shares

These small cap ASX stocks could rise 15% to 70%

Analysts think big returns could be on the cards for buyers of these stocks.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

2 under-$5 ASX hidden gems worth your attention

These buy-rated shares are flying under the radar. Let's see why analysts are bullish on them.

Read more »

Miner looking at a tablet.
Resources Shares

2 small-cap ASX mining shares exploding 40%+ on China tariff news

Investors are sending the small-cap ASX mining shares flying higher on Wednesday.

Read more »

Siblings jumping on a trampoline.
Small Cap Shares

3 ASX small-cap shares with a 'solid growth outlook' for 2025

A leading fund manager expects strong growth from these ASX small-cap stocks in 2025.

Read more »

A little girl with red hair runs excitedly with a rocket strapped to her back, trying to launch.
Small Cap Shares

Guess which ASX small-cap stock exploded 154% on big US news!

ASX small-cap stocks carry added risk, but also sometimes offer supersized rewards.

Read more »

A group of businesspeople clapping.
Healthcare Shares

This fund returned 109% in 2024. Here are 2 of its best-performing ASX shares

Small caps proved to be the winners last year.

Read more »