If you have a higher than average tolerance for risk, then it could be worth considering a few small cap ASX stocks for a balanced portfolio.
After all, the potential returns on offer at the small end of the market can be significant. Though, it is always worth remembering with this greater reward, comes greater risk.
With that in mind, let's take a look at three small cap ASX stocks that have been tipped to rise strongly from current levels. Here's what you need to know about them:
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Aroa Biosurgery Ltd (ASX: ARX)
Analysts at Bell Potter think that Aroa Biosurgery could be a small cap ASX stock to buy right now.
It is a wound repair specialist company that uses a decellularised extra cellular matrix derived from ovine (sheep) gut.
Bell Potter has been impressed with the company's performance in FY 2024 and expects more of the same in the coming years. It explains:
The Myriad product achieved the highest rate of revenue growth in FY24. It is applied in the surgical setting to provide a substrate for regeneration of soft tissue and for reconstructive surgery. In FY24 revenues grew by 75% to NZ$23.3m and we expect a similar growth rate in FY25 and FY26 driven by an expanded user base and data from the Myriad Augmented Soft Tissue Regeneration Registry (MASTRR). ARX also expects to report data from its 120 patient randomised clinical trial in diabetic foot ulcer patients. The trial is investigating the healing properties of the Symphony product. Earlier studies in a very difficult patient population with advanced DFU's provided highly supportive data on the rate of wound healing.
Bell Potter has a buy rating and 90 cents price target on its shares. This suggests that upside of 42% is possible over the next 12 months.
Camplify Holdings Ltd (ASX: CHL)
Another ASX small cap share that has been named as a buy is Camplify. It is the number one player in ANZ in the peer-to-peer RV rental space.
Morgans is a fan of the company due to its huge growth opportunity at home and abroad. 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.
The broker has an add rating and $2.55 price target on its shares. This implies potential upside of over 100% for investors.
Mach7 Technologies Ltd (ASX: M7T)
A third small cap ASX share that has been named as a buy is Mach7. It is an enterprise image management systems provider.
Morgans is feeling positive about the company's outlook and is forecasting strong revenue growth in the coming years. It said:
Mach7 is a provider of enterprise image management systems that allow hospitals to identify, connect and share image and patient care data. Revenue growth of at least 20% pa is expected over the next three years.
The broker has an add rating and a $1.56 price target on its shares. This suggests that its shares could more than double in value from current levels.
