Embarking on your investment journey could be both exciting and challenging. If fundamental growth stocks form the core, choice of Best Small Caps asx stocks can make or break the investments. Two such stocks from the ASX Small Caps List that are on their way to proving the potential and have much room for growth are
PointsBet Holdings Limited (ASX: PBH)
PointsBet Holdings Limited, in FY24 saw a 17% increase in revenue compared to the previous year. The company’s gross profit margin improved to 52.8%, due to better global efficiency and growing contributions from Canada, where the unit economics are more favourable. Marketing expenses decreased in both Australia and Canada, with Australia spending A$45.2 million (down 26%) and Canada A$25.8 million (down 12%).
Product and technology costs dropped by 29% due to reduced cloud hosting expenses following the sale of their US business, though some costs have since normalized. Operating expenses, excluding marketing, fell 6% to A$60.4 million as a result of cost-saving measures implemented after the US business sale. By June 30, 2024, PointsBet had A$28.1 million in cash. Net asset changes were influenced by the receipt of US$225 million from the US business sale, minus related costs and a US$21 million funding commitment. Overall, the company is well-positioned financially to support future growth and continue executing its strategic plans.
In its latest update, PointsBet highlighted significant improvements, with Canada reducing its statutory segment EBITDA loss from $35.8 million to $19.7 million, and Australia achieving a record revenue of $211.5 million, a 10% increase from the previous year.
PointsBet emerges as one of the small cap asx stocks to buy having shown consistent revenue growth since its inception, expanding its footprint in Australia and Canada. The company has tapped into a substantial total addressable market for online sports betting and iGaming, with notable progress in Canada since its launch in April 2022.
In Australia, PointsBet’s net win growth is on an upward trajectory, supported by stable contributions from customer cohorts and improving product loyalty, a trend that is also evident in Canada. For FY25, the company anticipates revenue between A$280 million and A$290 million, up from A$245.5 million in FY24. They expect to achieve EBITDA of A$11 million to A$16 million, compared to a loss of A$1.8 million previously. This growth will be driven by market share gains, maintaining a solid gross profit margin despite increased costs, and leveraging their fixed cost base for better efficiency. PointsBet aims to be cash flow breakeven by the end of FY25.
Embark Early Education Limited (ASX: EVO)
Embark Early Education Limited demonstrated strong growth and operational resilience in the first half of 2024, driven by strategic acquisitions and a commitment to enhancing shareholder value through dividends.
In the half-year ended 30 June 2024, Embark reported a net profit after tax from continuing operations of $2.488 million, an increase from $2.386 million in the prior comparative period. Increased revenues, effective control of support office costs, and the prudent use of centre-based labour within government-mandated guidelines drove this growth.
During this period, Embark made significant strides in expanding its operations, successfully acquiring five centres located in Queensland and Victoria. These acquisitions have added an additional 431 places per day to the group, further bolstering its capacity. Revenue growth for the half-year reached 17.7%, totalling $34.43 million, while underlying Australian centre EBITDA grew by 19.2%, reaching $8.06 million. The company’s strategy of adjusting fees in response to inflationary pressures has positively impacted overall financial performance.
Embark maintained a robust balance sheet with no borrowing as of 30 June 2024. The company reported cash reserves of $12.5 million and term deposits of $3.5 million. Additionally, Embark returned value to shareholders by paying a fully franked dividend of $0.03 during the half-year, with $0.015 distributed on 26 March 2024 and another $0.015 on 3 June 2024.
Embark Early Education Limited focuses on creating warm and welcoming childcare spaces that meet the needs of both children and their families. The company is poised for continued growth in 2H2024, driven by strong occupancy rates, currently at 83.5%, and the introduction of Queensland's "Free Kindy" initiative, enhancing affordability for families. Further acquisitions are on the horizon, positioning Embark for expansion, while the upcoming government-funded 15% educator pay increase, starting December 2024, promises to improve workforce stability.
Embark Early Education Limited is among asx small caps to buy, being in a strong position in the Australian childcare market, demonstrating solid financial stability and the potential for future growth.
Source: Company’s Report
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