Markets have a habit of moving quickly on political headlines. Sometimes too quickly.

That was on display recently when buy now, pay later stocks jumped on renewed discussion around a potential cap on US credit card interest rates, a proposal floated by US President Donald Trump during his campaign trail.

One Australian stock that caught investors’ attention was Zip Co Ltd (ASX: ZIP), which saw renewed buying interest as markets began to game out what a shake-up in US consumer credit might mean for alternative payment providers.

But while the initial reaction was swift, the reality may take far longer to unfold.

Why are BNPL stocks back in focus?

At the centre of the discussion is Trump’s suggestion that credit card interest rates in the US could be capped at around 10%.

Whether that proposal ever becomes policy is an open question. The US credit card industry is deeply entrenched, politically influential, and structurally complex. Any meaningful reform would likely face pushback from banks, lenders, and regulators.

Still, the idea alone was enough to get investors thinking.

If traditional credit cards were suddenly less profitable, or if lending standards tightened, consumers could look elsewhere for flexible payment options. That’s where buy now, pay later (BNPL) platforms potentially come back into the frame.

BNPL products typically avoid charging explicit interest, instead generating revenue from merchant fees and late payment charges. In a world where high-interest revolving credit becomes less attractive or less available, these platforms may appear comparatively more appealing.

What does this mean for Zip?

Zip has spent the past few years reshaping its business after the post-pandemic BNPL boom faded.

The company has pulled back from loss-making regions, simplified its product offering, and focused on improving unit economics. Management has been clear that profitability and cash discipline now matter more than headline growth.

Importantly, the US remains a key market for Zip. Any structural shift that encourages consumers away from traditional credit cards could, in theory, increase engagement with alternative payment products, such as Zip’s instalment plans.

That said, it is far too early to draw straight lines between campaign rhetoric and long-term earnings outcomes.

Why caution still matters

Political proposals often sound very different on the campaign trail compared to what eventually makes it into legislation.

Even if a cap on credit card interest rates were pursued, it could take years to implement, face legal challenges, or be watered down significantly. Banks may also respond by tightening credit access, adjusting fees elsewhere, or redesigning products in ways that preserve profitability.

For BNPL providers, regulation remains a double-edged sword. Greater scrutiny of consumer lending has already reshaped the sector, and further intervention could just as easily increase compliance costs as improve competitive positioning.

In other words, Zip’s share price reaction reflects anticipation, not confirmation.

Foolish Takeaway

Zip’s recent move highlights how quickly sentiment can shift when macro or political narratives change.

There is a plausible case that buy now, pay later companies could become downstream beneficiaries if the US consumer credit landscape is meaningfully altered. But for now, that remains a possibility rather than a forecast.

For long-term investors, the more important story remains Zip’s operational execution: improving margins, controlling costs, and demonstrating that its business model can deliver sustainable returns through the cycle.

Political headlines may spark interest. Fundamentals are what ultimately decide outcomes.

The post Could the Zip share price benefit from Trump’s latest proposal? appeared first on The Motley Fool Australia.

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Motley Fool contributor Leigh Gant has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Dateline Resources Ltd (ASX: DTR) share price is back in the spotlight on Monday. This comes after the company released a fresh drilling update from its flagship Colosseum project in California.

At the time of writing, the junior miner’s shares are up 8.18% to 29.8 cents in early afternoon trade, extending what has already been a remarkable rally.

Zooming out, Dateline shares are now up an astonishing 9,816% over the past 12 months and 32% year to date. This highlights just how sharply investor interest has returned to the stock.

So, what did the company announce, and why is the market reacting again?

Drilling pushes beyond current resource limits

The catalyst for today’s move was Dateline’s announcement of fresh drilling results from its Colosseum Gold-REE Project. These results confirmed wide zones of gold mineralisation extending beyond the current mineral resource boundaries.

The company reported multiple long and shallow intercepts from recent reverse circulation (RC) drilling, including:

• 295.64 metres at 1.04 g/t gold from surface
• 105.15 metres at 1.24 g/t gold from surface
• 300.21 metres at 0.66 g/t gold from surface
• 297.17 metres at 0.68 g/t gold from surface

Several of these results sit outside the existing resource envelope, suggesting there is scope for further resource growth.

Importantly, mineralisation remains open to the northeast, with Dateline highlighting ongoing expansion potential in that direction.

Deeper system still untested

Beyond the latest drilling results, the update also pointed to encouraging geological signals at depth.

RC drilling reached depths of around 300 metres, which is close to the practical limit for this drilling method. However, Dateline confirmed that mineralisation had not closed off at these depths.

Magneto-telluric conductivity data align with the new gold intercepts, reinforcing confidence that the system may extend further.

As a result, the company now plans to shift to diamond drilling to test deeper targets and better define the mineralised system.

Why investors are paying attention

Colosseum is a 100% owned project located in San Bernardino County, California, near the Mountain Pass rare earths mine. Dateline already has a JORC-compliant gold resource at the project, and management has been clear that its strategy is to expand that base.

After a year of explosive share price gains, volatility should be expected. Still, ongoing drilling success and clear exploration momentum explain why buyers continue to step in.

For now, it appears the market is keen to see just how big the Colosseum project could become.

The post Up 9,800% in a year, this ASX gold stock just delivered another major drilling surprise appeared first on The Motley Fool Australia.

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• Could the Zip share price benefit from Trump’s latest proposal?
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• Building wealth: Here’s why I prefer ASX share buybacks to dividends
• Domino’s shares trading higher as new local Chief Executive announced
• Domino’s Pizza Enterprises appoints new ANZ CEO and boosts executive team

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Buying S&P/ASX 200 Index (ASX: XJO) shares?

Then you’ve probably been keeping one eye on the shifting forecasts relating to Australia’s interest rate outlook for 2026.

For much of 2025, economists had been forecasting that ASX 200 investors could expect no less than two interest rate cuts from the Reserve Bank of Australia this year.

However, as inflation regained momentum over the latter months of 2025, it’s increasingly looking like the RBA will not just hold interest rates tight at the current 3.60%, but likely be forced to raise rates at least once in 2026.

With this picture in mind, here’s what the latest consumer spending data means for that outlook.

ASX 200 slides on household spending uptick

The Australian Bureau of Statistics released its November household spending report at 11:30am AEDT today. And the ASX 200 slipped 0.3% over the next half-hour.

That may be because investors fear the uptick in household spending could further cement an RBA interest rate hike when the central bank next meets on 3 February.

According to the ABS, Aussie household spending increased by 1.0% in November. This follows a 1.4% increase in Spending in October and a 0.4% lift in September.

As at the end of November, this sees Australia’s household spending up 6.3% year on year, which could help rekindle inflation.

Commenting on the latest spending data that looks to be pressuring the ASX 200 this afternoon, Tom Lay, ABS head of business statistics, said:

Household spending remained strong in November, continuing the strong rises in services and goods spending seen in October.

Services spending rose by 1.2%, driven by major events, including concerts and sporting fixtures. These events are linked to higher spending on catering, transport, and recreation and cultural activities.

Growth in goods spending, which lifted 0.9%, was driven by Black Friday sales. Clothing, footwear, furnishings, and electronics seeing the biggest gains as consumers took advantage of widespread discounts.

Household spending grew in all eight states and territories.

Miscellaneous goods and services led the spending boom for the 12 months to November, up 10.6% year-on-year. This was followed by recreation and culture, where spending surged 8.6% over the 12 months.

Prepare for higher interest rates

Last week, prior to the release of today’s ABS spending data, Commonwealth Bank of Australia (ASX: CBA) reiterated its expectations that ASX 200 investors will see the RBA lift the official cash rate in February.

“We maintain our view that the RBA will increase the cash rate by 25 basis points to 3.85% in February,” CBA economist Harry Ottley said.

The post Buying ASX 200 shares? Here’s what the latest spending report means for interest rates in 2026 appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When ASX shares want to return capital to their shareholders, they typically have two choices. The first, and most beloved, method is by paying a dividend. The second, undertaking a share buyback program.

Dividends are easily the preferred method of capital return for most ASX investors. That’s understandable. After all, nothing quite compares to that feeling of receiving cold, hard cash in return for a past investment.

Share buybacks don’t involve a direct transfer of wealth from the company to the investor. As such, many investors prefer that a company pay out a dividend if it has money to spare. But I would prefer most of my investments to undertake buybacks. Let’s talk about why.

Share buybacks vs. dividends

Buybacks and dividends are similar in origin. Both can only be undertaken, at least sustainably, if a company is healthily profitable. And both methods benefit shareholders, obviously. But that’s where the similarities end.

Dividends represent one-off cash payments, with that cash taken directly out of the company’s bank account. Dividends are fantastic for shareholders, but it is important for investors to recognise that they inherently weaken a company. That cash that is paid out in dividends can only be used once. Once it is paid out, it cannot be reinvested into the business or used to pay down debt.

Investors should keep this in mind. If a company is choosing to use its cash to incentivise shareholders at the expense of paying down high-interest debt or investing in lucrative business opportunities, if possible, then shareholders are likely to suffer down the road.

Share buybacks involve using a company’s cash to purchase its own shares from the open market. Once these shares are bought, they are destroyed. This reduces the company’s overall share count, and thus boosts the ownership stakes of all remaining shareholders.

If done correctly, I think share buybacks are more beneficial to both shareholders and the company than paying out a dividend.

This is because a share buyback program offers investors ongoing benefits, while a dividend payment does not. Once a dividend has been declared and funded, that cash goes out the company door, never to return and never to benefit the company again.

But in the case of a share buyback, that reduced share count is a permanent change to the company’s investment profile. For the following year, as well as all years that come after, that reduced share count stays. This means there are perpetually fewer shares to divide earnings and profits amongst going forward, meaning earnings per share (EPS) will enjoy an everlasting boost from the reduced share count. Further, there are now fewer shares to pay dividends to going forward, meaning any future dividend declaration will be cheaper for the company to fund.

When do share purchases make sense?

So it’s for this reason that I would prefer to see most of my ASX shares use their cash to fund share buyback programs rather than larger dividends.

There is one caveat to this, though. That would be pricing. Like you or I, companies that buy their own shares usually have to do so at market pricing. The efficiency of using the company’s own funds to buy back its shares is higher when the company’s valuation is lower, and vice versa.

Buybacks only benefit shareholders when they are done at compelling valuations. If I saw that Commonwealth Bank of Australia (ASX: CBA), for example, was buying back its own stock when it hit $193 a share last year, I would regard it as an exceptionally poor use of capital, given how expensive its shares were, relative to its earnings, at that price.

If CBA undertook a buyback when its shares went under $90 each back in 2022 though, I would have been in full support.

Like all investors, companies should only buy shares when the prices make it an attractive long-term investment. If they can do so, I’ll take it over a dividend any day.

The post Building wealth: Here’s why I prefer ASX share buybacks to dividends appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Shares in Domino’s Pizza Enterprises Ltd (ASX: DMP) are trading higher on Monday after the company announced its new local Chief Executive Officer. The company remains on the hunt for someone to fill the top job at the company.

In a statement to the ASX on Monday morning the company said experienced Domino’s and quick service restaurant executive Merrill Pereyra would take over the role overseeing Australia and New Zealand effective 23 January.

Depth of knowledge

Mr Pereyra, the company said, had more than 30 years’ experience in the sector including regional leadership roles with McDonalds and as chief executive of Domino’s Pizza Indonesia.

The company added:

Since 2019 Mr Pereyra has been managing director of Pizza Hut, India, for Yum! Brands, where he led a turnaround of sales performance and halved store paybacks.

Domino’s executive chairman Jack Cowin said the company was “delighted” to appoint an executive of Mr Pereyra’s calibre to the role.

Merrill has a track record of building franchise relationships, growing same store sales and unit economics to return to network expansion – the board is confident he will work closely with our franchise partners to improve our business performance.

Domino’s also said that George Saoud, who was appointed chief financial officer in July last year, would also now take on the role of Chief Operating Officer.

The company added:

Mr Saoud’s expanded role will help to drive sustainable growth across Domino’s global operations, and reflects the company’s focus on disciplined execution, operational performance and cost management across the group.

In terms of filling the group Chief Executive role, Domino’s said the search is “progressing well”.

Work to be done

Domino’s will be looking to turn around its results from last year, when total sales fell 0.9% to $4.15 billion and EBIT was 4.6% lower at $198.1 million.

The company lost its previous Chief Executive, former Coca Cola executive, Mark van Dyck in July, with the company’s shares being sold down to their weakest levels in 11 years at the time.

Mr van Dyck had only been in the top role for eight months, and Mr Cowin stepped in during the interim period to oversee the company.  

Domino’s shares were trading 4.2% higher on the news on Monday, up 95 cents to $23.50. Domino’s shares have traded as low as $13.11 in the past year and as high as $36.68.

Domino’s was valued at $2.12 billion at the close of trade on Friday.

Domino’s is one of the most-shorted stocks on the ASX, with its short interest currently sitting at 17.7%.  

The post Domino’s shares trading higher as new local Chief Executive announced appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Today, Domino’s Pizza Enterprises Ltd (ASX: DMP) announced two major leadership changes. Specifically, a new CEO for Australia and New Zealand and expanded responsibilities for its Group CFO.

What did Domino’s Pizza Enterprises report?

• Merrill Pereyra appointed as Chief Executive Officer, Australia and New Zealand, effective 23 January 2026
• George Saoud now serves as both Group Chief Financial Officer and Group Chief Operating Officer
• Saoud’s remit expands to include Technology and Procurement & Supply Chain
• Permanent Group CEO search is ongoing, with updates to be provided in due course

What else do investors need to know?

Domino’s says Merrill Pereyra brings over 30 years of experience in the quick service restaurant sector, including leadership roles at McDonald’s, Pizza Hut, and Domino’s Indonesia. The company credits Pereyra with delivering positive same store sales and improved unit economics during his tenure at QSR Brands and Pizza Hut India.

Meanwhile, George Saoud’s new combined role aims to drive sustainable growth across global operations, signalling Domino’s focus on disciplined execution and operational excellence. The appointments underscore the board’s commitment to accelerating turnaround priorities and strengthening leadership across key markets.

What did Domino’s Pizza Enterprises management say?

Executive Chairman Jack Cowin said:

We are delighted to appoint an experienced industry executive of Merrill’s calibre to the key ANZ market for our company.

Merrill has a track record of building franchise relationships, growing same store sales and unit economics to return to network expansion – the board is confident he will work closely with our franchise partners to improve our business performance.

What’s next for Domino’s Pizza Enterprises?

The company says the board is making steady progress in its search for a permanent Group Chief Executive Officer, with further updates promised in due course. With its refreshed leadership, Domino’s aims to lift performance across its network and drive disciplined growth, especially in its Australia and New Zealand operations.

Investors will be watching how the new executives shape Domino’s strategy, operational discipline, and growth ambitions in the months ahead.

Domino’s Pizza Enterprises share price snapshot

Over the past twelve months, the Domino’s Pizza Enterprises shares have declined 16%, trailing the S&P/ASX 200 Index (ASX: XJO) which has risen 7% over the same period.

View Original Announcement

The post Domino’s Pizza Enterprises appoints new ANZ CEO and boosts executive team appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.

BHP Group Ltd (ASX: BHP) shares and other S&P/ASX 200 Index (ASX: XJO) copper stocks, including Sandfire Resources Ltd (ASX: SFR) and Canadian-based Capstone Copper Corp (ASX: CSC), could enjoy some ongoing tailwinds in 2026.

All three of the miners – and their shareholders – have already benefited from surging copper prices over the past year.

Copper is currently fetching US$12,998 per tonne. That’s up 43% from this time last year, when that same tonne was trading for US$9,094.

The meteoric rise of the red metal has helped send the Capstone Copper price soaring 50.6% over the past 12 months. And shares in Sandfire, perhaps the purest play ASX 200 copper stock, have rocketed 99.9% over this time.

With a far more diversified commodity base, and iron ore still counting as its top revenue earner, BHP shares have gained a more modest 18.4% in 12 months. Though unlike its rivals, BHP shares also trade on a fully franked 3.7% dividend yield.

For some context, the ASX 200 has gained 7% over the full year.

Why ASX 200 copper stocks could keep smashing the benchmark

The copper price has been surging amid fast-growing demand to meet the needs of the global energy transition, amid limited supply growth. Copper is also critical in plumbing and in combustion engines, as well as EVs.

And forecast ongoing demand growth should see further price gains for the red metal, helping support BHP shares and other top ASX 200 copper stocks like Sandfire and Capstone.

Indeed, as The Australian Financial Review reports, Morgan Stanley expects 2026 will see the copper market enter its worst deficit in more than two decades.

And that deficit could continue to run for many years.

S&P Global expects that global copper demand will leap from 28 million tonnes in 2025 to reach 42 million tonnes by 2040, representing a 50% increase in demand.

“Without significant adjustments, copper supply faces a growing challenge of keeping up with the accelerating pace of electrification,” S&P Global noted in what will come as good news to investors in ASX 200 copper stocks.

According to Carlos Pascual, S&P Global senior vice president of geopolitics and international affairs (quoted by the AFR):

Countries are recognising that there’s a concentration of processing in China, and it’s reinforcing a recognition of the importance of supply chain diversification.

The uses of copper have become fundamental requirements in national security. The race to win in AI is fundamental, and that has raised its connection with electricity and to copper as a national security issue.

The proliferation of EVs and the ongoing artificial intelligence revolution are expected to turbocharge copper demand, which would help support Sandfire and BHP shares in the medium to longer term.

Daniel Yergin, S&P Global vice chairman, noted:

It was not until November 2022 that the AI arms race began. So, you have a lot of new demand coming into the system that wasn’t there before.

An electric car uses 2.9 times more copper than a conventional car. Over 90% of the electric generating capacity that was added last year was wind and solar, and they are much more copper-intensive than traditional electric generation, particularly solar.

BHP shares increasing copper exposure

Although BHP shares don’t offer as direct exposure to copper prices as ASX 200 copper stocks like Sandfire Resources, BHP has been actively working to increase its copper exposure.

In its FY 2025 full-year results release, BHP noted:

In FY25, BHP’s total copper production increased for a third consecutive year to a record 2,017 kt, 28% higher than in FY22, driven by strong performances across all operated copper assets.

This drove a 44% increase in our total copper Underlying EBITDA to US$12.3 bn and increased copper’s contribution to the Group’s Underlying EBITDA to 45% (FY24: 29%).

Group copper production for FY26 is expected to remain strong at between 1,800 kt and 2,000 kt on a consolidated basis.

And at its latest September quarter results release, BHP reported a 4% increase in copper production, with record concentrator throughput at Escondida.

“In copper, major disruptions at some of our competitors’ mines have tightened overall market fundamentals, benefitting our world-class portfolio of assets,” BHP CEO Mike Henry said on the day.

The post Why ASX 200 copper stocks like Sandfire and BHP shares could be in the sweet spot in 2026 appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended S&P Global. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If I knew I wouldn’t be able to check my portfolio for the next 12 months, I wouldn’t want to own anything that required close monitoring or perfect timing.

In that situation, I would focus on businesses with competitive advantages, predictable demand, and management teams that have already proven they can navigate different conditions without constant intervention.

These are three ASX 200 shares I’d be comfortable owning if I had to step away for a year and let the businesses do the work.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is a stock I trust due to its diversified business.

Through brands like Bunnings, Kmart, Officeworks, WesCEF, and its growing healthcare exposure, Wesfarmers generates cash from multiple sources rather than relying on a single driver. That diversification helps smooth performance when individual segments face pressure.

Just as importantly, management has a strong track record of disciplined capital allocation. The company has shown it is willing to invest when returns make sense, exit when they do not, and maintain balance sheet strength throughout.

If I could not check my portfolio for a year, I would want a business like Wesfarmers quietly compounding in the background.

CSL Ltd (ASX: CSL)

CSL earns its place on this list through the essential nature of its products.

The company operates in global plasma therapies and vaccines, areas where demand is driven by medical need rather than economic conditions. That makes its earnings more resilient than those of many cyclical businesses.

CSL also benefits from scale, deep expertise, and long-term investment in research and development. These factors create high barriers to entry and support sustainable returns over time.

Healthcare stocks are rarely free from short-term noise, but if I had to look away for a year, CSL is exactly the kind of business I would trust to keep executing.

Transurban Group (ASX: TCL)

Transurban appeals to me for its predictability.

This ASX 200 share owns and operates toll roads in major cities where population growth, congestion, and commuting patterns are long-term realities. People may complain about tolls, but they continue to use the roads.

Revenue is supported by long-term concessions and, in many cases, inflation-linked pricing. That provides visibility around cash flows and supports ongoing distributions to investors.

While large infrastructure projects take time to develop, Transurban’s existing asset base does most of the heavy lifting. That makes it a business I am comfortable owning without needing to track daily developments.

Foolish Takeaway

If I couldn’t check my portfolio for a year, my priority would be peace of mind.

Wesfarmers, CSL, and Transurban operate in very different parts of the economy, but they share important qualities. They provide essential goods or services, generate reliable cash flows, and are run by management teams with long-term track records.

For me, those are exactly the kinds of ASX 200 shares worth trusting when the best move is simply to stay invested and let time do its work.

The post 3 ASX 200 shares I’d trust if I couldn’t check my portfolio for a year appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in CSL, Transurban Group, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Transurban Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Transurban Group. The Motley Fool Australia has recommended CSL and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Small cap ASX shares are not for everyone, but they can play an important role in a long-term portfolio.

These companies are often earlier in their growth journey, which means they can be more volatile in the short term. In return, successful execution can translate into outsized returns over time as markets expand, earnings scale, and business models mature.

With that in mind, here are three small cap ASX shares that could be worth a closer look.

Catapult Sports Ltd (ASX: CAT)

Catapult Sports is a leader in elite sport wearables and data analytics.

The company provides wearable tracking technology and performance software used by professional sporting teams around the world. These tools help teams optimise performance, manage athlete workloads, and reduce injury risk, which are areas where marginal gains can make a meaningful difference.

What makes Catapult interesting as a small cap opportunity is its global footprint and recurring revenue model. As more sports adopt data-driven decision making, demand for Catapult’s analytics platform continues to expand. With a growing customer base and improving operating leverage, the company appears well placed to benefit as adoption deepens over time.

Morgans is a fan and recently put a buy rating and $6.25 price target on its shares.

Gentrack Group Ltd (ASX: GTK)

Another small cap ASX share that could be a top buy is Gentrack. It is a specialist software provider to the energy and utilities sector.

Its billing and customer management platforms are used by electricity, gas, and water companies as they modernise systems and adapt to increasingly complex energy markets. The global energy transition is adding further demand for flexible software capable of handling renewables, distributed generation, and dynamic pricing.

Gentrack’s revenue is largely recurring, supported by long-term contracts and high switching costs. As utilities continue to invest in digital infrastructure, the company has the potential to steadily grow earnings while expanding its presence in international markets.

Bell Potter is positive on the company’s outlook. It has a buy rating and $11.00 price target on its shares.

Universal Store Holdings Ltd (ASX: UNI)

Universal Store is a small cap ASX retail share with a strong track record of execution.

The company focuses on youth fashion, combining a curated product range with disciplined store expansion. Its emphasis on private label products and cost control has helped support margins, even during periods of softer consumer spending.

Bell Potter is also a big fan of the company. It has named it as a best buy with a price target of $10.50.

The post 3 growing small cap ASX shares with huge potential appeared first on The Motley Fool Australia.

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Shares in Electro Optic Systems Holdings Ltd (ASX: EOS) are edging higher today. This comes after the company announced a major acquisition aimed at strengthening its counter-drone capabilities.

At the time of writing, the EOS share price is up 0.92% to $9.89 in late morning trade.

So, what exactly did EOS announce?

A closer look at the MARSS deal

According to the release, EOS has entered into an agreement to acquire the MARSS counter-drone command and control business. MARSS is a Europe-based provider of advanced software and AI systems used to detect, track, and respond to drone threats.

Under the terms of the deal, EOS will pay an upfront cash amount of US$36 million (roughly $54 million). On top of that, there is potential earn-out consideration of up to 100 million euros, linked to how many new third-party contracts MARSS secures over the earn-out period.

Those additional payments are performance-based, meaning EOS only pays more if new sales are delivered. The transaction is expected to be completed in 2026, subject to customer, regulatory, and other standard approvals.

Why EOS wants this capability

EOS is already well-known for its remote weapon systems, sensors, and defence hardware. What MARSS brings is advanced command and control software that uses AI to link sensors, decision-making, and response systems into a single platform.

This enables military and security operators to identify drone threats more quickly, assess them more accurately, and respond more effectively, even in complex swarm scenarios.

EOS believes combining its existing hardware with MARSS software will allow it to offer full end-to-end counter-drone solutions, rather than selling individual components.

What it means for earnings and cash flow

EOS said the acquisition is expected to be broadly neutral for earnings and operating cash flow in 2026. That reflects the upfront investment and integration work required.

However, management expects the deal to contribute positively to results from 2027 onwards, assuming contract wins follow.

EOS also noted that the upfront cash payment is expected to be funded from existing cash reserves, which stood at approximately $107 million as of the end of December.

The bigger picture for investors

This announcement supports EOS’ longer-term strategy to become a global defence technology provider across autonomous systems, counter-drone solutions, and space capabilities.

Success will depend on integration and contract wins, but the deal has the potential to improve EOS’ competitive position.

The next test will be how effectively EOS converts this strategy into signed contracts.

The post Why investors are watching this ASX defence stock today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.