The Australian share market is home to a good number of promising small caps that have the potential to grow strongly over the 2020s.
Three that could be worth watching closely are listed below. Here's what you need to know about them:
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Adore Beauty Group Ltd (ASX: ABY)
The first small cap to watch is Adore Beauty. It is Australia's leading online beauty retailer with ~700,000 active customers. Adore Beauty could be destined for big things thanks to its very long runway for growth. This is due to the relatively low penetration of online beauty sales relative to other Western markets and categories.
Morgan Stanley has an overweight rating and $6.00 price target on its shares. It believes the company can grow strongly over the medium term.
Bigtincan Holdings Ltd (ASX: BTH)
Another small cap share to look at is Bigtincan. It is a leading provider of enterprise mobility software to businesses globally. Bigtincan's popular software unlocks new and more effective ways for teams to perform at higher levels and deliver better business results by creating more positive and efficient buying experiences. Demand for its software continues to grow and is underpinning strong annualised recurring revenue (ARR) growth.
Morgan Stanley appears to believe this strong form can continue. Late last month it put an overweight rating and $2.10 price target on Bigtincan's shares.
Damstra Holdings Ltd (ASX: DTC)
A final small cap to watch is Damstra. It is a growing integrated workplace management solutions provider which provides a cloud-based workplace management platform that is used by businesses globally. Its platform allows users to track, manage, and protect their workers and assets. Demand has been increasing strongly in recent years and this continued in FY 2021, underpinning solid revenue growth.
Shaw and Partners is very positive on the company. It currently has a buy rating and $1.88 price target on Damstra's shares. The broker believes its shares are extremely cheap and sees potential for a major re-rating as its recurring revenues ramp up and margins improve.
