There's no doubt small-cap ASX shares can fly high in a hurry unlike anything their larger rivals are likely to do.

But nothing comes for free, and this type of explosive growth won't just fall into an investor's lap.

Picking the right small-cap stock requires much research of businesses where information might be pretty scarce.

And because many of them are in pre-profit or even pre-revenue stages, financial fundamentals might not even necessarily reflect their future potential.

It's indeed an imprecise art.

However, there are professional investors that study small caps for a living. Listening to their favourite picks and the rationale behind them might provide some insight for your own decisions.

One of those pros is Salter Brothers portfolio manager Gregg Taylor. This week, he named one ASX stock with a bright outlook that investors may not know much about:

Dirt cheap for 'defensive growth'

Acrow Formwork and Construction Srvc Ltd (ASX: ACF) provides services and formwork solutions for the civil construction industry.

Those in the know have flocked to the stock, seeing the share price rocket more than 39% over the past year.

Taylor's team reckons there's still upside in excess of 45% above the current share price over the next couple of years.

The business is "consistently growing" its revenue and earnings, as seen over the five years that it's been listed on the ASX.

"It's also generating good cash, has a good balance sheet, is quite profitable and is dividend-paying — fully franked yield of close to 6%."

Despite the rise in share price, Acrow shares are still trading at a price-to-earnings multiple of seven to eight times, which is a bargain in Taylor's eyes.

"So you're not paying a lot for that defensive growth."

The post The obscure ASX share with 45% upside one small-caps expert is backing right now appeared first on The Motley Fool Australia.

But which small cap ASX shares should you buy? Listed below are two that Morgans rates very highly. Here's why it is bullish on them:

Acrow Formwork and Construction Services Ltd (ASX: ACF)

The first small cap ASX share that Morgans is bullish on is Acrow. It provides engineered formwork, scaffolding, and screen systems solutions to the construction sector.

Morgans likes the company due to its belief that it is well-placed to benefit from growing civil infrastructure activity across the east coast. It also highlights its attractive valuation and even more attractive dividend yield. It said:

ACF is a well-managed business with leverage to growing civil infrastructure activity over the long-term, especially on the east coast. We believe the valuation remains attractive (~7x FY23F PE and ~6.5% yield) with potential positive catalysts from further meaningful contract wins.

The broker has an add rating and 84 cents price target on its shares. This suggests potential upside of 23% for investors over the next 12 months based on the current Acrow share price.

Mach7 Technologies Ltd (ASX: M7T)

Morgans is positive on this enterprise image management systems provider. It believes Mach7 is well-positioned to deliver strong top line growth over the coming years. It explained:

Mach 7 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 currently has an add rating and $1.34 price target on its shares. So, with the Mach7 share price currently fetching 73 cents, this implies potential upside of 83% for investors over the next 12 months.

The post Broker says these small cap ASX shares offer big returns potential appeared first on The Motley Fool Australia.

Here's what the broker is saying about these small caps:

Acrow Formwork and Construction Services Ltd (ASX: ACF)

The first small cap ASX share that Morgans is tipping as a buy is Acrow Formwork and Construction Services. It is a leading provider of engineered formwork, scaffolding, and screen systems solutions as well as in-house engineering and industrial labour supply services to the construction sector.

Last month, Acrow released its full year results and revealed a 40% increase in revenue to $148.3 million and the doubling of its net profit after tax to $17.8 million.

Morgans was impressed and believes the company is well-placed for further growth. It also highlights that its shares trade on very low multiples despite this positive form. The broker commented:

ACF is a well-managed business with leverage to growing civil infrastructure activity over the long-term, especially on the east coast. We believe the valuation remains attractive (~6x FY23F PE and ~6.5% yield) with potential positive catalysts from further meaningful contract wins.

Morgans has an add rating and 80 cents price target on Acrow's shares.

Mach7 Technologies Ltd (ASX: M7T)

Another small cap ASX share that the broker is a fan of is Mach7. It is a medical imaging systems provider that develops innovative image management and viewing solutions for healthcare organisations.

As with Acrow, it was in fine form in FY 2022. For the 12 months, Mach7 reported a 42% increase in revenue to $27.1 million and a 253% jump in EBITDA to $2.8 million.

The good news is that Morgans expects this solid growth to continue in the coming years. The broker commented:

Mach 7 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.

Morgans has an add rating and $1.34 price target on Mach7's shares.

The post Broker names 2 small cap ASX shares to buy now appeared first on The Motley Fool Australia.

The Acrow Formwork and Construction Srvc Ltd (ASX: ACF) share price is running higher on the back of a new record of secured hire contract wins. At the time of writing, the construction services company's shares are up 2.74% to 38 cents.

Record contract wins

Investors are scrambling to pick up Acrow shares after the company updated the ASX with its latest performance report.

According to its release, Acrow advised it has achieved a record month of secured hire contract wins. During March, the company also attained $5.9 million in new hire contracts. Furthermore, this figure represents a 92% increase on the prior corresponding period. In addition, this was an 18% improvement on its previous best month record accomplished in November 2020.

Acrow highlighted that the 3 largest months in terms of new hire contracts have occurred within the past 5 months.

For the March quarter, the company reported $11.2 million in new contract win, reflecting a 50% jump on Q3 FY20. Underpinning the strong result, Queensland saw strong growth across all sectors.

Acrow stated that the robust March quarter performance has indeed set itself up for a strong start to the financial year. June hire revenue is set to come in around $4.5 million which is likely to lead to another exceptional result. The company however decided to maintain its earnings before interest, tax, depreciation and amortisation (EBITDA) guidance for FY21. It is forecasting EBITDA to come between $23.5 million to $24.5 million.

What did the CEO say?

Acrow CEO, Steven Boland hailed the robust performance, saying:

I expect 1Q22 will see this momentum continue as we reap the benefit of the great successes, we are achieving in securing new contracts. The results we are seeing are a testament to the innovative, customer solutions focus of our market-leading engineering team as well as the strong ability of our sales teams to convert opportunities into revenue.

Acrow remains very well positioned to benefit from the substantial infrastructure development program earmarked over the next 3-5 years in Australia and most likely beyond.

About the Acrow share price

The Acrow share price has gained over 50% in the past 12 months but is relatively flat year-to-date. The company's shares are within sights of its 52-week high of 41 cents reached in early December.

Based on the current share price, Acrow presides a market capitalisation of roughly $83.9 million, with 222.8 million shares outstanding.

The post Why the Acrow (ASX:ACF) share price is running higher today appeared first on The Motley Fool Australia.

If ever there was a time for ASX investors to ignore the noise, now is that time.

While day traders may delight in the opportunities for quick gains in these volatile conditions – and lament the equally quick losses – it can be a trying time for buy to hold investors.

By that I mean investors who buy shares in quality businesses with good management and growing revenues, and hold onto those shares for many years. Generally, until their original investment thesis changes substantially enough to alter the long-term outlook for share price gains and/or dividend streams. Only then (barring any urgent needs for funds) is there good reason to sell.

Buy to hold investing, with the right diversification among shares, is a historically proven way to grow your wealth over time. But it can be vexing when the share prices of your carefully chosen businesses fall on rumours of a 'hard Brexit', then rise on news of a promising COVID-19 vaccine, only to fall again when the United States' president is stricken by that same virus.

But fear not. (Noise alert!)

The latest headlines across the financial media inform us that Australian and Asian share markets are swinging higher again today and US markets should follow.

Why?

Because Donald Trump may be released from hospital as soon as today (tonight Aussie time).

As I said, if you're day trading you could lock in some quick gains if you guess the market direction on these kinds of short-term announcements correctly. Or book some quick losses if you guess wrong.

But if you're holding onto quality shares that look set to perform well during the COVID-19 recovery period and beyond, then your best bet is to tune out the noise. Or at least take it all in with a big grain of salt.

Focus on what matters

Not to diminish Trump's physical battle to recover from the coronavirus. I wish him, and everyone infected with COVID-19, a full and rapid recovery. But at the end of the year, or next year, this will have no bearing on the share prices of your ASX holdings. Even if this event serves to tip the November election for a Joe Biden victory.

You may have heard that Biden has pledged to raise the US business tax rate. The same rates Trump slashed to the delight of corporate America, helping send US share markets to new highs. But there's no guarantee Biden will use up the political capital needed to try and follow through with this pledge. And even less certainty that his Democratic party will take control of the US Senate to enable raising the corporate tax rates in either case.

There's enough uncertainty already that buy to hold investors should readily ignore this as noise. Topping it off, increasing corporate tax rates in the US would likely drag on US share markets, but the longer-term impact on ASX shares would be mixed… and minimal.

Yes, some Aussie companies would have to pay more taxes in the US, should this all come to pass. But at the same time, many ASX shares would get a boost as global investors re-rate their potential returns in an environment of higher US taxes.

Here comes the stimulus

What we do know for certain is that, following the COVID-19-led market panic in February and March, record levels of central bank and government stimulus measures were rolled out across the developed world.

And we know that share markets rallied at historic paces.

The S&P/ASX 200 Index (ASX: XJO) rocketed 35% higher from 23 March through to 9 June. And the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) posted an incredible 76% gain from the 23 March lows through to 2 September.

Today, both indexes are still trading below those highs as investors await details of the next stimulus measures.

In the US, Democrats are still pressing their US$2.1trillion (AU$2.9 trillion) package. While Republicans continue to balk at that, Trump spoke out from hospital to urge both sides to reach an agreement and pass a new spending package. As a long-term investor, it doesn't much matter if that passes this week or next month. What matters is the US government will most assuredly open the fiscal taps wide once more.

Here in Australia, we'll get the full details of the new budget tomorrow. From everything we've seen so far, it's going to be huge, with personal and business tax cuts, home buying incentives, and a big splash on manufacturing and state infrastructure programs.

That's a good reason to hold onto your infrastructure plays. And perhaps buy or add more of these two shares.

Two ASX shares to buy today

First up is Transurban Group (ASX: TCL). With a market cap of $38.6 billion, Transurban is not only one of the world's largest toll road operators, it also designs and builds new road projects.

When lockdown measures began to sink in earlier this year, Transurban's share price took a big hit, falling 39% from 19February through to 19 March. It's gained 42% since that low, leaving the share price down 4% in 2020. But as Victorians emerge from their travel restrictions and begin paying tolls once more, and with new road construction highly likely to ramp up with the coming wave of stimulus, Transurban is well positioned to offer significant mid to long-term share price growth. 

Second up is small-cap share Acrow Formwork and Construction Srvc Ltd (ASX: ACF). With a market cap of $78 million, Acrow manages more than 50,000 tonnes of formwork and scaffolding equipment across Australia.

Acrow's share price was smashed during the COVID-19 panic selling, falling 63% from 21 February through to 23 March. Since then the share price has soared 177% higher, putting it up 6% year-to-date.

But even after that phenomenal run, Acrow shares could have a lot further to run as the next big rounds of pandemic recovery stimulus spur new construction projects.

The post Ignore the noise and focus on these ASX shares instead appeared first on The Motley Fool Australia.