Very big rewards could be on offer from these small cap ASX shares

Brokers say that these small cap ASX shares offer a compelling risk/reward.

| More on:
Businessman working and using Digital Tablet new business project finance investment at coffee cafe.

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

If you have a high tolerance for risk, then it could be worth looking at the ASX small-cap shares listed below.

That's because they have been rated as buys and tipped to climb meaningfully from current levels. Here's what analysts are saying about them:

Janison Education Group Ltd (ASX: JAN)

Bell Potter is feeling positive about Janison and believes it is a small-cap ASX share to buy now. It operates in the online enterprise learning and digital assessment segments of the education technology sector.

The broker has been pleased with the company's transition towards providing standardised SaaS platforms. It commented:

JAN has continued to transition away from developing bespoke assessment software for large enterprises and towards providing standardised SaaS platforms, assessment content and delivering high-stakes, high-volume digital exams. As a result, the company has gained scale benefits from an improved customer and product mix and higher-margin, recurring contractual revenues. [..] We believe JAN remains well equipped to provide any digital infrastructure catch-up needed to facilitate a hybrid learning environment.

Bell Potter has a buy rating and 65 cents price target. This implies a potential upside of over 60% for investors.

Readytech Holdings Ltd (ASX: RDY)

Another small-cap ASX share that could be a buy is Readytech. Goldman Sachs is a fan of the provider of mission-critical software-as-a-service (SaaS) solutions for the education, workforce management, government and justice sectors.

The broker notes that these are defensive markets, which bodes well for the company in the tough economic environment. It also feels its shares are undervalued given its positive outlook. It said:

RDY appears to be making solid progress on its strategy to move upmarket and win larger deals contemporaneously with margin expansion, as evidenced by its solid FY24 guidance, however the market may await further proof points until fully crediting RDY with a multiple commensurate to its growth outlook and quality of underlying assets. The company continues to screen undervalued compared to ASX Software peers, trading at ~10x FY24 EV/EBITDA against a mid-to-high teens organic EBITDA growth outlook.

Goldman Sachs has a buy rating and a $4.50 price target on its shares. This suggests a potential upside of 24% from current levels.

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 Janison Education Group and ReadyTech. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Janison Education Group. The Motley Fool Australia has recommended ReadyTech. 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 young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Small Cap Shares

These small cap ASX shares could rise 50% to 65%

The team at Bell Potter is bullish on these names. Let's find out why.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Small Cap Shares

Want to beat the stock market? I'd focus on buying these ASX shares

I think these ASX shares offer plenty of promise.

Read more »

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

Guess which small cap ASX stock is rocketing 28% on $100m deal

It has been a very good start to the day for owners of this 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

Bell Potter says this small cap ASX stock can rocket 40%+

Let's see what Bell Potter is saying about this small cap.

Read more »

A person sitting at a desk smiling and looking at a computer.
Share Market News

2 ASX small caps with serious market-beating potential

Here's two compelling ideas to add to your watchlist.

Read more »

Woman in business suit holds both hands out with a question mark above each hand.
Small Cap Shares

Building a market beating portfolio: ASX 200 stocks vs small caps

From blue-chip shares to small-caps what’s best for your portfolio?

Read more »

Two kids in superhero capes.
Small Cap Shares

2 small ASX shares to buy that have big potential

A fund manager is optimistic about 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

3 of the best small cap ASX stocks to buy now

Bell Potter thinks these shares are among the best to buy at the small end of town.

Read more »