2 small cap ASX shares to buy for 20% to 50% returns

Bell Potter is tipping these small caps to rise strongly from current levels.

| More on:
A young well-dressed couple at a luxury resort celebrate successful life choices.

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're wanting some exposure to small cap ASX shares, then it could be worth checking out the two below that Bell Potter has named as buys today.

Here's what the broker is saying about them:

LGI Ltd (ASX: LGI)

The first small cap ASX share that has been named as a buy is LGI.

It is the local market leader in the recovery of biogas from landfill, and the subsequent conversion into renewable electricity and saleable environmental products.

Bell Potter was pleased with news that the company has signed a long-term gas management agreement with Bingo Industries, and its subsidiary Dial A Dump, covering the Eastern Creek Landfill site in Western Sydney. The broker commented:

In our view, a contract of this significance further validates LGI's position as an industry leader in biogas recovery, which we view as a significant growth market to facilitate the transition to net-zero. The net result of our changes are minor downgrades to our FY24 estimates but more substantial upgrades to our long-term forecasts based on increased biogas flows from the new Eastern Creek Landfill project, which drives our upgrade to a BUY recommendation.

Bell Potter has upgraded its shares to a buy rating with an improved price target of $2.55. This implies potential upside of 23% for investors.

Nexted Group Ltd (ASX: NXD)

Another small cap ASX share that has been named as a buy is Nexted. It is a provider of tertiary education services to international and domestic students.

Bell Potter notes that Nexted has just released a trading update and guidance for FY 2024. The broker concedes that the update was modestly softer than it was expecting. It explains:

NXD expects to report 1H24 revenue +36% YoY to $59.2m (vs. BPe $59.8m) which is at the lower end of the guidance range as previously flagged ($59.0m-$63.0m).

Nevertheless, its analysts remain very positive on the company due to its exposure to the rebounding international student market. It said:

The re-opening of Australia's international borders and removal of COVID restrictions, has prompted a strong recovery in international students in Australia. NextEd has significant exposure to this market with international students accounting for >75% of the total student and revenue mix. This recovery has (1) driven unprecedented demand for NextEd English language courses and (2) provided a subsequent cross-selling opportunity of progressing English students into other NextEd courses.

Bell Potter has retained its buy rating and $1.05 price target on its shares. This suggests 52% upside for investors.

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

Before you buy Lgi 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 Lgi 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 9 January 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 LGI Limited. The Motley Fool Australia has recommended LGI 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 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 »

A boy stands firm on a rocky cliff holding a rocket in each hand and looking up toward the sky, anticipating flying into space.
Technology Shares

2 small-cap ASX tech shares rocketing on big US news

The junior ASX tech shares are enjoying a big lift following positive developments in the US.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Small Cap Shares

Guess which ASX small-cap is up 92% in just 2 days!

Investors have been fighting to get hold of this stock this week. But why?

Read more »

Two boys looking at each other while standing by start line on stadium against two schoolgirls.
Small Cap Shares

The imminent tailwind for ASX small-cap shares: fundie

Oscar Oberg from Wilson Asset Management explains why he thinks it's a good time to buy small-caps.

Read more »

Small girl giving a fist bump with a piggy bank in front of her.
Small Cap Shares

Want more exposure to small-cap stocks? I'd invest in this ASX ETF

Small-caps can have a lot of growth potential.

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

Bell Potter says this ASX share is a 'small-cap investment opportunity'

The broker thinks this small cap is destined to deliver strong earnings growth.

Read more »

man looking happy and excited as he looks at his mobile phone
Small Cap Shares

Guess which small cap ASX stock is jumping 12% despite the market selloff

Let's find out why investors are buying this small cap today.

Read more »