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Date : 13/09/2021

Top 2 ASX Small Caps Stocks To Buy in 2021

The ASX 200 is in the green today, bolstered by the energy and material sectors. At the time of writing, the benchmark is 0.38% higher than it was on Friday. It has gained 28.9 points today. Explore our list of ASX Small Caps Stocks to buy in September 2021.

Our list of top 2 ASX Small Caps Stocks to consider this week

After a small pullback initiated during mid-August, today’s green day could be an occasion to diversify your portfolio with two promising stocks.

Adore Beauty Group Limited (ASX: ABY)

There are industries such as the beauty industry that are exposed to ongoing overall growth. Some ASX shares are capitalising on this. Hence, the beauty and personal care market in Australia is worth $11.2 billion and is expected to grow at a CAGR of 26% by 2024. Online sales comprise just 11.4% of the beauty and personal care market in Australia. That is a lower rate of penetration than in other developed markets.

Adore Beauty (ASX: ABY) is the one that shared those interesting characteristics about the beauty market. It’s an e-commerce business that sells around 11,000 products across more than 260 brands.

Due to the large opportunity, we expect to Adore tremendous growth of its online beauty retail. Thus, the company plans to invest to expand its market share with a disciplined strategy, and increase its brand awareness, to win new customers.

What we like about this beauty ASX shares is its predominantly fixed nature of the cost base. Therefore, we expect that scale benefits will increase and improve the operating leverage. Consequently, this will support Adore’s EBITDA margin growth in the long run as the firm grows its revenue.

Actually, Adore is seeing a lot of revenue growth. In FY21 it experienced sales growth of 48% to $179.3 million, along with EBITDA growth of 53% to $7.6 million.

Whilst active customers increased by 39% to 818,000, returning customer growth is 64%. This led to annual revenue per active customer rising by 7% to $219. This was driven by strong customer retention and an increasing average order value.

With expected strong revenue growth to continue onward FY22, we think that Adore is one great stock pick to diversify your portfolio.

Pointerra Ltd (ASX: 3DP)

Pointerra is engaged in the development and commercialization of 3D geospatial data technologies. The company offers real-time, dynamic Web viewing tools.

The Pointerra share price is on the rise again after surging 810% in 2020. Here is Pointerra’s impressive performance in a nutshell:

  • Annual contract value (ACV) up 241% to US$9.8 million
  • Customer revenues rose 224% to $3.98 million
  • Customer cash receipts increased 121% to $4.07 million
  • Underlying EBITDA of $1.27 million in FY21 compared to FY20: $1.83 million
  • Solid cash balance of $5.18 million

2021 has proved to be a challenging year for Pointerra. That has been reflected in the company share price, down 28.4% year-to-date. This follows a bumper performance in 2020 where its shares skyrocketed from 5.5 cents to 51 cents.

During the FY21, the company acquired a US-based aerial imagery company, Airovant for US$1 million. The acquisition was described as a step-change in the dimension and scale of Pointerra’s US operations. Thus, this change has an important impact in the architecture, engineering and construction facilities management and energy utility markets.

Pointerra continues to expand across its key market sectors. Moreover, Airovant’s contribution to earnings helped deliver the triple-digit increase across key financial metrics.

With a cash balance of $5.18 million for the year ended 30 June, we believe that Pointerra is well-funded to continue its organic growth in the following years.

Furthermore, Pointerra successfully developed a digital twin solution for tier-1 mining sector customers in Australia. It expects to launch the product in the US market. The company forecasts mining sector ACV spend to continue to grow in FY22.

Despite a solid outlook for FY22, the Pointerra share price is currently hanging around 9-month lows. Hence, this could be a good opportunity to consider this amazing stock before it might become too expensive.

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