If you're wanting to invest in the small side of the Australian share market, then the two small caps listed below could be worth a closer look.
Here's why these small caps are rated highly by analysts:
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Infomedia Limited (ASX: IFM)
The first small cap share to look at is Infomedia. It is a leading global provider of software as a service solutions to the parts and service sector of the automotive industry.
In FY 2021, the company overcame tough trading conditions to deliver a solid full year result. It reported a 3% increase in revenue to $97.4 million and an 8% lift in net profit after tax to $20 million.
Looking ahead, management is expecting a much stronger performance in FY 2022. It has given revenue guidance of $117 million to $123 million for the year. The mid-point of this guidance range implies revenue growth of 23% year on year.
One broker that is very positive on Infomedia is Bell Potter. It currently has the company as its second favourite pick in the tech sector. The broker has a buy rating and $2.00 price target on its shares.
Over The Wire Holdings Ltd (ASX: OTW)
Over The Wire is a telecommunications, cloud, and IT solutions provider. It offers an integrated suite of products and services to business customers including data networks and internet, voice, data centre co-location, cloud and managed services.
The company has been growing strongly in recent years and this continued in FY 2021. For the 12 months ended 30 June, Over The Wire reported a 29% lift in revenue to $112.7 million and a 36% jump in EBITDA to $23.5 million. Pleasingly, its revenue is now almost entirely recurring in nature. In FY 2021, the company's recurring revenue grew 38% to $103.2 million.
Looking ahead, management is confident that it will deliver organic recurring revenue growth of at least 15% in FY 2022.
The team at Ord Minnett are positive on the company. The broker currently has a buy rating and $5.06 price target on its shares.
