If you have a high tolerance for risk, then it could be worth adding some exposure to small caps to your investment portfolio.
Especially when analysts are tipping the three in this article to deliver outsized returns for investors over the next 12 months.
Here's what you need to know about these buy-rated small cap ASX shares:
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AVITA Medical Inc (ASX: AVH)
AVITA Medical could be a small cap to buy according to analysts at Morgans. It is a regenerative medicine company with a focus on wound care management and skin restoration with its RECELL technology.
The broker notes that the US FDA has just approved its RECELL Go product. It is an autologous cell harvesting device, harnessing the regenerative properties of a patient's own skin to treat burn wounds and full-thickness skin defects. The broker sees this a very big milestone for the company. Morgans said:
AVH has received FDA approval for its automated product, RECELL Go, for use in burns and full thickness skin defects. This approval marks a significant milestone for the company, with management expecting this device to increase adoption of the technology amongst clinicians. We have made no changes to our forecasts and recommendation.
Its analysts have an add rating and $5.60 price target on the company's shares. This implies that its shares could more than double in value.
Camplify Holdings Ltd (ASX: CHL)
Another small cap ASX share that Morgans rates highly is Camplify. It is a peer-to-peer recreational vehicle (RV) rental operator.
Morgans likes the company due to its market leadership position and its significant local and global market opportunities. It explains:
We expect CHL to continue to grow into its large addressable market locally, with over 790k registered RVs in Australia and ~130k in NZ. CHL only has ~2% of these on its platform. It has broadly doubled its domestic fleet since listing and with its acquisition of Germany- based PaulCamper (PC) now has a total fleet of over 29,000, making it a true global player.
Morgans has an add rating and $2.55 price target on its shares. This also suggests that its shares could more than double from current levels.
Universal Store Holdings Ltd (ASX: UNI)
A third small cap ASX share that is rated highly is Universal Store. It is the youth fashion retailer behind the Universal Store brand, as well as the Perfect Stranger and Thrills brands.
Bell Potter is a fan of the company and believes it is well-positioned for strong growth and improved margins. It said:
Management execution remains a key strength for UNI and we see good growth trajectory for the name given the building of core brands while growing its store rollout. In our view, the higher margin sales from the majority private label sales should become a major driver of margin improvement and earnings growth, in an expanded store footprint.
Bell Potter has a buy rating and $6.15 price target on its shares. This implies potential upside of 19% for investors.
