Although the small side of the market is higher up the risk scale and unsuitable for some investors, I feel it is well worth getting a little exposure to it if your risk profile allows.
Three top small cap shares that I think are worth a closer look are listed below:
Citadel Group Ltd (ASX: CGL)
Citadel Group is a fast-growing software and services company which specialises in IT security and data management. Thanks partly to the growing popularity of its Citadel-IX cloud-based enterprise information management platform, Citadel delivered record revenues of $108.5 million and a 26% increase in net profit after tax to $19.4 million in FY 2018. The Citadel-IX platform allows users to securely access or transfer proprietary and sensitive information remotely and has understandably attracted a large number of government customers. Due to the growing amount of data being created by companies and how important it is for this data to be secure, I believe Citadel is well-positioned to continue its strong performance in FY 2019 and beyond.
ELMO Software Ltd (ASX: ELO)
ELMO Software is a leading provider of integrated cloud human resources and payroll software solutions. While its growth since its IPO has been impressive, it is still only scratching at the surface of an ANZ market opportunity that management estimates to be worth upwards of US$770 million per year. In FY 2018 ELMO achieved pro forma revenue of $31.9 million and pro forma SaaS revenue of $29.8 million. This beat management's upgraded guidance and meant growth of 36.4% and 37.2%, respectively, on the prior year. The strong performance was driven by the almost doubling of its customer numbers from 524 to 1,045 and a 3.9% increase in average revenue per SaaS customer to $34.50. Another positive is that 93.2% of its revenue is classed as recurring, giving the company a strong foundation to build on in FY 2019.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara Health Technologies is a breast imaging analytics and analysis software specialist on the rise. It recently advised that its market share had grown to 3.7% of all women screened in the United States. Pleasingly, due to the quality and popularity of its product, management expects to grow its share of the market to a massive 9% by the end of the current financial year. If it achieves this then FY 2019 is likely to be another year of bumper annual recurring revenue growth. In FY 2018 annual recurring revenues rose by a massive 223%.
