The reality is that small-cap ASX shares just don't get as much analyst coverage as their larger-cap counterparts.
The great news for investors is that this lack of light can sometimes mean you could pick up a bargain before the rest of the market catches up to a booming business.
Here are two examples that the team at Celeste Funds Management are bullish on after a pleasing reporting season:
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Higher margins coming
Internet service provider Aussie Broadband Ltd (ASX: ABB) enjoyed an almost 30% surge in its share price during August.
It's cooled off a tad this month but is still trading more than 38.5% higher than where it started the year.
The Celeste analysts, in a memo to clients, indicated their pleasure in what they saw in the annual report.
"The company reported $89.6 million EBITDA (guidance: $85 to $90 million), with their continuing growth trajectory supporting forward guidance for $100 to $110 million FY24 EBITDA."
Traditionally a consumer business, the company is increasing its presence in the corporate and government market segments.
"Management highlighted the high margin opportunity into FY24 from Enterprise & Government with $10 million new unbilled revenue and a growing sales pipeline."
NBN Co's proposed new pricing structure could come in before the end of the year, which is expected to be favourable.
"This should provide cost certainty for retailers and specifically benefit Aussie Broadband through reduced costs for higher speed plans."
Four out of seven analysts currently surveyed on CMC Markets rate Aussie Broadband as a strong buy.
Making a mockery of the IPO prospectus
Redox Pty Ltd (ASX: RDX) only listed in July, but the business has been around since the 1960s.
The company, which distributes chemicals, plastics, and other industrial materials, saw its share price rise 12.5% last month.
The Celeste team said Redox delivered "a pleasing maiden earnings report".
"The FY23 result was ahead of prospectus forecasts on almost all lines of the income statement, resulting in underlying NPAT of $89.1 million coming in 10% ahead of prospectus of $81.3 million."
This bodes well for another beat of its prospectus forecasts in the 2024 financial year.
"We remain attracted to Redox, as it is a family-founder led company, with a long track record of earnings growth, net cash balance sheet and trading at an undemanding valuation."
While analyst coverage is sparse for the western Sydney outfit, both experts surveyed on CMC Markets currently rate the stock as a buy.
