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Smaller ASX growth shares have the potential to deliver really good returns because of their ability to scale up from the current starting point.

I want to see businesses that can grow their revenue and profit margins, leading to excellent profit growth and, hopefully, good shareholder returns. Below are two I’m excited about.

Collins Foods Ltd (ASX: CKF)

Collins Foods operates KFC outlets in Australia, the Netherlands and Germany.

I’m optimistic about this company because KFC has a strong brand in the fast food space, and simply rolling out more locations in Australia and Europe could be a good driver of earnings. In the first half of FY24, it added eight new KFCs in the Netherlands and four KFC locations in Australia.

But, the ASX growth share is also growing same store sales (SSS) at a solid pace at the moment. In HY24, KFC Australia saw SSS growth of 6.6%, and KFC Europe’s SSS grew by 8.8%. Existing stores are performing strongly, and the overall network is growing at a solid pace.

As a bonus, it’s also responsible for Taco Bells in Australia, which is a useful growth avenue for the company, though it’s relatively small at this point.

The revenue rose 14.3%, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 16.7%, and underlying net profit after tax (NPAT) went up 28.7%.

The Collins Foods share price has dropped more than 20% since mid-January, so it looks much better value now. According to Commsec, the ASX growth share is now priced at under 13x FY26’s estimated earnings.

Airtasker Ltd (ASX: ART)

Airtasker offers a platform where people can advertise almost any task they need help with, which individuals and businesses can offer to do for a fee.

The ASX growth share claims to be the leading marketplace for local services in Australia and it’s now trying to do the same thing in the UK. It has signed a 5-year media-for-equity partnership with Channel 4 In the UK.

In the FY24 third quarter, Airtasker marketplace revenue rose 11.5% to $10.1 million, while UK posted tasks increased by 49.1% year over year.

To me, one of the most exciting things is that profit can soar from here, depending on how much it decides to re-invest for more growth. The business has a gross profit margin north of 90%, so new revenue is very profitable.

The FY24 third quarter saw free cash flow of $2.5 million, an improvement of $5.1 million year over year. I think the ASX growth share has a capital-light model which will enable it to make much stronger profit in the next two or three years.

The post 2 top ASX growth shares I’d buy today appeared first on The Motley Fool Australia.

More reading

• How to choose ASX shares for passive income
• Top ASX shares to buy for your superannuation fund in May 2024
• The smartest ASX growth shares to buy with $500 right now
• 2 ASX small-cap shares with excellent potential I’d buy right now
• 2 under-the-radar ASX growth shares I just bought for my investment portfolio

Motley Fool contributor Tristan Harrison has positions in Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Coles Group Ltd (ASX: COL) shares could be a smart buy today. There are several advantages and disadvantages to consider when weighing up whether to dive into the ASX supermarket stock right now. Let’s take a closer look.

The Coles share price has experienced its fair share of ups and downs over the past year, as we can see from the chart above.

Which way is the market going to send the business next? Whilst we can’t know what the company’s share price will do in the short term, here’s what I’m taking into account for the long term.

Positives

The company is delivering solid supermarket sales growth, stronger than that of arch-rival Woolworths Group Ltd (ASX: WOW). In the FY24 third quarter, Coles supermarkets saw sales growth of 5.1% to $9.06 billion. Including liquor sales and the sales to service station operator Viva Energy Group Ltd (ASX: VEA), Coles Group’s total sales increased 3.4%.

Another positive is the impressive growth rate of e-commerce sales, which helped drive the overall numbers. The supermarket’s e-commerce sales increased 34.9% to $856 million over the quarter.

In the early part of the fourth quarter, supermarket volumes remained “positive”. Coles also reported having made “good progress” in addressing “loss” (theft), with efforts continuing in the fourth quarter. If Coles can keep improving on this front, that’s good news for shareholders.

The opening of Coles’ Kemps Creek automated distribution centre and its two customer fulfilment centres will “be yet another step” towards “improving operating efficiency” and differentiating its offer.

In terms of earnings, I like how defensive the supermarket’s revenue is – we all need to eat! According to Commsec estimates, Coles is projected to generate earnings per share (EPS) of 81 cents in FY24 and 95.4 cents in FY26. That puts the current Coles share price at around 20x FY24’s estimated earnings and 17x FY26’s estimated earnings.

The dividend is yet another reason to consider buying Coles shares – the payout has increased every year since listing. Commsec numbers suggest a grossed-up dividend yield of 5.9% in FY24 and 7% in FY26.

Negatives to keep in mind about Coles shares

Coles is not exactly a high-growth ASX stock, so investors should be patient when it comes to capital growth and earnings growth. Furthermore, there’s no guarantee that good sales growth will continue. Population growth is a useful tailwind, but it’s not a given it will translate into earnings growth

Cost inflation is another factor investors should consider. Coles has already said its wages are increasing materially in FY24, and the new warehouses have higher costs (including depreciation).

The final negative factor for me is that Coles’ debt levels have increased due to spending on the new warehouses. Some investors aren’t fans of debt, particularly in an environment of high interest rates.

Foolish takeaway

Ultimately, I think Coles shares are a reasonable long-term buy right now, but there are some downsides to keep in mind. Steady earnings growth and a decent dividend yield could combine to deliver comparatively good overall returns.

The post The pros and cons of buying Coles shares right now appeared first on The Motley Fool Australia.

More reading

• Buy these ASX stocks for 4% and 8% dividend yields
• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• Top ASX shares to buy for your superannuation fund in May 2024
• Which of these ASX 200 shares is the better bargain in May?
• 4 ASX retirement shares to buy in May

Motley Fool contributor Tristan Harrison 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 positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A high-performing S&P/ASX 200 Index (ASX: XJO) gold stock is marching higher again today.

Shares in the big Aussie gold miner closed on Friday trading for $2.00. At the time of writing, in early morning trade on Monday, shares are swapping hands for $2.03 apiece, up 1.5%.

For some context, the ASX 200 is down 0.1% at this same time.

Investors are bidding up the ASX 200 gold stock after the miner reported on a sizeable resource upgrade at one of its key projects.

Any guesses?

If you said Ramelius Resources Ltd (ASX: RMS), go to the head of the virtual class.

Here’s what’s happening today.

ASX 200 gold stock gaining on expanded resource

The Ramelius Resources share price is in the green on news the Mineral Resource Estimate for its Eridanus project at the Mt Magnet gold mine in Western Australia has been increased by 64%.

The ASX 200 gold stock said the updated Mineral Resource Estimate now includes the adjacent Lone Pine and Theakston deposits. The MRE also incorporates recent drilling and mining information collected at the sites.

This brings the new estimate to 21 million tonnes at 1.7 grams of gold per tonne for a total of 1.2 million ounces.

The increased MRE has positive implications for both open pit and underground options, which remain available beyond the current open pit. The miner noted that this itself is expected to produce some 300,000 ounces of gold once completed and all stockpiles are processed.

In ongoing exploration at the project to improve the analysis of both mining options, Ramelius plans to kick off a 10,000 metre drill program next month. The drill campaign will include 3,300 metres of diamond drilling,

What did management say?

Commenting on the increased MRE boosting the ASX 200 gold stock today, Ramelius managing director Mark Zeptner said, “In keeping with the previously released Mt Magnet 10-Year Plan, the Eridanus project is expected to figure prominently in one form or another for the entirety of the mine plan.”

Zeptner added:

Today’s significant resource upgrade, both in terms of tonnes and grade, augurs well for a mine life well beyond 10 years especially if an open pit option is ultimately chosen.

Given the 64% increase is net of depletion and the current open pit will produce over 300,000 ounces once processed, Eridanus is set to become the third one-million-ounce-plus mine in the Mt Magnet field, after Hill 50 & Morning Star.

With today’s intraday gains factored in, shares in the ASX 200 gold stock are now up 19% in 2024 and up 45% over the past full year.

The post Guess which ASX 200 gold stock is marching higher on a ‘significant resource upgrade’ appeared first on The Motley Fool Australia.

More reading

• Top ASX gold shares to buy in May 2024
• Here are the top 10 ASX 200 shares today
• Buying ASX gold shares? Here’s where this top fundie sees ‘multi-bagger’ gains on offer
• How this ‘bullish kicker’ could send the gold price rocketing to US$3,000 per ounce
• Here are the top 10 ASX 200 shares today

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.

The ANZ Group Holdings Ltd (ASX: ANZ) share price is starting the week in the red.

In morning trade, the banking giant’s shares are down by 4% to $27.89.

As a comparison, the benchmark ASX 200 index is currently 0.1% lower in early trade.

Why is the ANZ share price tumbling?

The big four bank’s shares are falling today after trading ex-dividend for its upcoming interim dividend.

When a share trades ex-dividend, it means that the rights to an impending dividend payment are now settled.

As a result, if you were to buy its shares today, the rights to that dividend would stay with the seller and not transfer to the buyer.

Given that a dividend forms part of a company’s valuation, a share price will tend to drop in line with the value of the dividend on the ex-dividend date. After all, it new buyers don’t want to pay for something that they won’t receive.

What is the ANZ dividend?

Last week, ANZ released its first-half results and reported a cash profit of $3,552 million for the six months ended 31 March. This represents a 1% decline compared to the second half of FY 2023.

This reflects a strong performance from the Institutional business, which reported a 12% lift in cash profit to $1,522 million, which was offset by a poor half for the Australia Retail business. It posted a 9% decline in cash profit to $794 million despite delivering above-system home loan growth with pricing above cost of capital.

However, much to the delight of shareholders, that profit decline didn’t stop the bank from increasing its dividend by 2 cents year on year to 83 cents per share. This dividend is partially franked at 65%.

Based on Friday’s closing ANZ share price of $29.09, this dividend equates to an attractive 2.9% dividend yield. And there’s still a final dividend coming in six months.

But what will that dividend be? Analysts at Goldman Sachs believe that a final dividend of 81 cents per share will be declared with the bank’s full year results. This will bring its total dividends for the year to $1.66 per share. This equates to a dividend yield of 5.7% based on last week’s closing price.

When is pay day?

Eligible shareholders won’t have to wait too long until they are paid out the bank’s interim dividend.

ANZ is currently scheduled to make this dividend payment in 7 weeks on 1 July.

ASIC investigation

In other news, also potentially weighing on the ANZ share price is reports that ASIC is investigating the company for suspected contraventions of a number of provisions of the ASIC Act and the Corporations Act.

According to The Australian, the investigation relates to ANZ’s execution of a 2023 issuance of 10-year Treasury Bonds by the Australian Office of Financial Management.

The post Why is the ANZ share price sinking today? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Should you buy ANZ shares before they trade ex-dividend next week?
• It was huge week for ASX 200 bank shares. Here’s why
• Where I’d invest $7,000 in ASX dividend stocks right now
• Analysts give their verdict on ANZ shares: Should you buy?

Motley Fool contributor James Mickleboro 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 Goldman Sachs Group. 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.

ASX shares that offer dividends can be appealing, but how are you supposed to choose between them all for passive income?

In this article, I’m going to talk about three of my favourite ways to evaluate ASX dividend shares. Some investors may have different priorities, but I’d suggest that each element that I’m going to talk about is important for every income investor to think about.

Dividend yield

The headline-grabber for a lot of dividend investors is the dividend yield, so let’s start there.

This tells us how much of a cash payment an investor can expect from their investment. For example, if someone invested $1,000 in a business with a 4% dividend yield, it’d pay $40 over a year. A 6% dividend yield would pay $60. And so on.

As income investors, we want a certain amount of payout from our stocks. However, a yield that is too big may not be the best option if the dividend is in danger of being cut or if a high dividend payout ratio means little re-investing for growth.

Examples of high-yield dividend shares I’m interested in are Telstra Group Ltd (ASX: TLS) and Metcash Ltd (ASX: MTS). In FY25, according to Commsec, Telstra is projected to pay a grossed-up dividend yield of 7.4%, and Metcash is projected to pay a grossed-up dividend yield of 7.8%.

Stability

Passive income is a useful source of returns, but only if the payments keep coming. If someone is relying on income to pay for their life expenses, then they need those dividends to keep flowing, even during a recession.

Dividends aren’t guaranteed, but some businesses operate in more stable industries than others, resulting in stable profits and resilient payments.

Commodity prices have a history of bouncing around, so while Rio Tinto Ltd (ASX: RIO) has a projected grossed-up dividend yield of 7.5% for FY24, it could easily be substantially smaller in FY25 if the iron ore or copper price crashed in 2025.

Energy infrastructure business APA Group (ASX: APA) provides half of the nation’s gas usage, which provides predictable cash flow to pay growing distributions. It has grown its distribution every year for the past 20 years.

Brickworks Limited (ASX: BKW) has a diversified asset base, which is paying its growing rental profits and rising dividends, enabling Brickworks to grow its dividend every year for the past decade. It hasn’t cut its dividend for almost 50 years.

Sonic Healthcare Ltd (ASX: SHL) is an ASX healthcare share that has grown its dividend most years over the past three decades, including consistent annual growth over the past decade.

Dividend growth

The last few years have shown how important it is for our work/investment income to grow to ensure we stay on top of inflation.

A business like APA has a great track record of slow and steady growth, but there are a number of companies that have grown their dividends at a much faster pace. That means a lower starting dividend yield can catch up to and overtake a high (but stable) yield over the years.

For example, Collins Foods Ltd (ASX: CKF) has grown its annual dividend by around 150% in the past decade.

Pinnacle Investment Management Group Ltd (ASX: PNI) has grown its annual dividend by 210% in the last six years.

Fund manager GQG Partners Inc (ASX: GQG) has just grown its latest quarterly payment by 56% year over year.

Foolish takeaway

By looking at these three passive income factors, I think investors can build a good dividend portfolio without being lured into names that aren’t necessarily the right long-term choice (in my opinion).

I’m a fan of many of the businesses I’ve mentioned, which is why I’m a shareholder in a lot of them for dividends and long-term capital growth.

The post How to choose ASX shares for passive income appeared first on The Motley Fool Australia.

More reading

• 2 top ASX growth shares I’d buy today
• These ASX dividend shares offer 6%+ yields
• ASX 200 banks vs. mining stocks: Which is the better buy today?
• Here’s how the ASX 200 market sectors stacked up last week
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement

Motley Fool contributor Tristan Harrison has positions in Brickworks, Collins Foods, Metcash, and Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, Pinnacle Investment Management Group, and Telstra Group. The Motley Fool Australia has recommended Collins Foods, Metcash, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Luckily for income investors, there are plenty of ASX income stocks to choose from on the Australian share market.

However, with so many to choose from, it can be hard to decide which ones to buy above others.

But don’t worry, that’s because analysts have been doing the hard work for you and have picked out two stocks that they rate as buys for income investors.

Here’s what you need to know about them:

Coles Group Ltd (ASX: COL)

Analysts at Morgans think that this supermarket giant would be a great option for income investors.

In fact, the broker is so bullish it added the company’s shares to its best ideas list this month. The broker said:

In our view, the ongoing scrutiny on the supermarkets has affected short term sentiment in the sector, which we believe creates a good buying opportunity in COL. While Liquor sales remain soft, we expect the core Supermarkets division (~92% of earnings) to continue to be supported by further improvement in product availability, reduction in total loss, greater in-home consumption due to cost-of-living pressures, and population growth.

Morgans has an add rating and $18.95 price target on its shares.

In respect to income, the broker is expecting fully franked dividends per share of 66 cents in FY 2024 and 69 cents in FY 2025. Based on the latest Coles share price of $16.24, this equates to dividend yields of 4.1% and 4.25%, respectively.

Dexus Convenience Retail REIT (ASX: DXC)

The Dexus Convenience Retail REIT could be an ASX income stock to buy now. That’s the view of analysts at Bell Potter, which are very positive on the service stations and convenience retail focused real estate investment trust.

Bell Potter highlights that the company could offer investors compelling returns. This includes a very big dividend yield. It said:

Sub-sector with a high level of ownership from privates and HNW’s means petrol stations are typically more liquid that any commercial real estate that carries larger cheque sizes. Management has actively recycled capital leading to a balance sheet with low headroom & ICR risk. Compelling risk-adjusted returns: DXC offers a yield c.8% based on mid-point of FY24 DPS guidance. While we do see asset values declining (BPe 30bp cap rate expansion), trading at a 27% discount to NTA and 10% discount to BPe NAV looks too punitive to us for a defensive sub-sector.

The broker has a buy rating and $3.00 price target on its shares.

As for dividends, Bell Potter is forecasting dividends per share of 20.9 cents in FY 2024 and 20.7 cents in FY 2025. Based on its current share price of $2.61 this equates to yields of 8% and 7.9%, respectively.

The post Buy these ASX stocks for 4% and 8% dividend yields appeared first on The Motley Fool Australia.

More reading

• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• Top ASX shares to buy for your superannuation fund in May 2024
• Which of these ASX 200 shares is the better bargain in May?
• 4 ASX retirement shares to buy in May
• Looking for ASX All Ords shares to buy? Top broker reveals 4 best ideas this month

Motley Fool contributor James Mickleboro 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 positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The lithium industry has been under significant pressure over the past 12 months due to a collapse in battery material prices.

While this has dragged most ASX lithium stocks significantly lower, that doesn’t necessarily mean that they are all buys.

Let’s now take a look at two popular options and see what analysts are saying about them at current levels. They are as follows:

Core Lithium Ltd (ASX: CXO)

This lithium miner’s shares are down almost 90% over the last 12 months. Investors have been hitting the sell button after weak lithium prices weighed heavily on its operations.

In fact, things have got so bad that the lithium miner is actually more of a processor than anything now. That’s because it has suspended mining operations indefinitely and is just processing ore stockpiles until they run out in the middle of the year.

Goldman Sachs thinks investors should stay well clear of the company. That’s because it still believes the ASX lithium stock is overvalued despite its significant decline. It said:

We rate CXO a Sell on: (1) Valuation, trading at a premium on ~1.1x NAV and an implied LT spodumene price of ~US$1,200/t (peer average ~1.05x & ~US$1,250/t (lithium pure-plays ~US$1,140/t)), with the lowest average operating FCF/t LCE on a more moderated/deferred production restart/ramp up, (2) Ongoing risk to restart timing in the current pricing environment, with a mine restart highly unlikely ahead of the next wet season and, given the Grants open pit has ~12 months of life, likely tied to a development decision on BP33 (with its own funding risks) to support a new processing contract, increasing the risk of a longer gap in production; (3) Potential resource growth/ development now likely longer dated.

Goldman has a sell rating and 11 cents price target on Core Lithium’s shares.

Arcadium Lithium (ASX: LTM)

With its shares down by a third since the start of the year, Bell Potter thinks that Arcadium Lithium is an ASX lithium stock to buy now.

Particularly given its very positive production growth outlook and its diverse operations. The broker explains:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. In supportive markets, LTM’s growth pipeline could see the company more than double production over the next three years.

Bell Potter has a buy rating and $9.50 price target on its shares.

The post One ASX lithium stock to buy and one to sell appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• These ASX shares could rise 30% to 60%
• Forget Pilbara Minerals and buy this ASX 200 lithium stock instead
• At 14 cents, has the Core Lithium share price become a bit of a joke?
• Bell Potter names more of the best ASX 200 stocks to buy

Motley Fool contributor James Mickleboro owns Arcadium Lithium shares. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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.

At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Pilbara Minerals Ltd (ASX: PLS) remains the most shorted ASX share with short interest of 21.5%. This is down slightly week on week again. Short sellers appear to believe that lithium prices will be staying lower for longer.
• IDP Education Ltd (ASX: IEL) has 16.3% of its shares held short, which is up week on week again. This may be due to the language testing and student placement company battling tough trading conditions caused by student visa changes.
• Syrah Resources Ltd (ASX: SYR) has short interest of 13.1%, which is down week on week. This graphite miner continues to burn through cash due to weak battery materials prices.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest increase week on week again to 11.9%. Last week, the travel agent revealed that it expects record sales in FY 2024. Short sellers didn’t appear fazed by this.
• Liontown Resources Ltd (ASX: LTR) has 10.9% of its share held short, which is up week on week. This lithium developer is making good progress with the Kathleen Valley Lithium Project. Despite this, short sellers continue to target the company.
• Core Lithium Ltd (ASX: CXO) has short interest of 8.2%, which is flat week on week. This lithium miner has suspended mining operations due to weak lithium prices.
• Sayona Mining Ltd (ASX: SYA) has short interest of 8.1%, which is also flat week on week. This lithium miner hasn’t suspended its operations despite selling its lithium for $500 less per tonne than it costs to produce.
• Westgold Resources Ltd (ASX: WGX) has short interest of 8.1%, which is up strongly since last week. Short sellers seem to be unsure about the gold miner’s plan to merge with Canada-based Karoa Resources.
• Chalice Mining Ltd (ASX: CHN) has entered the top ten with short interest of 7.7%. This mineral exploration company’s shares have lost 81% of their value over the last 12 months. It seems that short sellers don’t believe the declines are over.
• Strike Energy Ltd (ASX: STX) has returned to the top ten with short interest of 7.55%. This gas company’s shares have been hammered this year due to disappointment over drilling at the SE-3 well.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

More reading

• One ASX lithium stock to buy and one to sell
• These ASX shares could rise 30% to 60%
• Liontown shares charge higher on lithium project update
• Forget Pilbara Minerals and buy this ASX 200 lithium stock instead
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro 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 Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group and Idp Education. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you have a higher-than-average tolerance for risk, then you might want to consider adding some small caps to your investment portfolio.

But which small cap ASX shares should you buy?

Listed below are three that Morgans has on its best ideas list. Here’s why it is bullish on them:

AVITA Medical Inc (ASX: AVH)

This regenerative medicine company’s shares could be seriously undervalued according to Morgans. Particularly given the recent expansion of the ASX small cap share’s RECELL technology into new and lucrative indications. The broker commented:

AVH is a regenerative medicine company focusing on the acute wound care market. It has recently expanded its indication into full thickness skin defects and Vitiligo (US$5bn TAM). The expanded indication in full thickness skin defects has the required reimbursement in place and sales have started. AVH has provided revenue guidance for FY24 of growth of ~64% and importantly has guided to achieving profitability by 3QCY25. At the same time, the company is seeking approval by the FDA for its automated device RECELL Go, which if successful will launch 1 June 2024, and will be a meaningful driver of rapid adoption by clinicians.

Morgans has an add rating and lofty price target of $6.40.

Camplify Holdings Ltd (ASX: CHL)

This peer-to-peer RV rental operator could be a small cap ASX share to buy according to Morgans.

It likes the company due to its market leadership position in a significant global market. The broker said:

We expect CHL to continue to grow into its large addressable market locally, with over 790k registered RVs in Australia and ~130k in NZ. CHL only has ~2% of these on its platform. It has broadly doubled its domestic fleet since listing and with its acquisition of Germany- based PaulCamper (PC) now has a total fleet of over 29,000, making it a true global player.

Morgans has an add rating and $2.85 price target on its shares.

Superloop Ltd (ASX: SLC)

Another small cap ASX share to consider buying is Superloop. It is a growing telco with over 400,000 customers.

The broker is a big fan of Superloop and has named it as its top telco pick. This is thanks to its strong balance sheet and earnings and free cash flow growth. It explains:

SLC is our key telco pick. It’s the fastest growing, has a solid balance sheet (virtually no debt), and the highest Free Cash Flow yield in our coverage. The share price has lifted following a substantial upgrade to earnings expectations and a takeover offer from ABB (which the SLC Board declined). Even though the share price is up ~100% over the past 6 months, earnings have more than exceeded this. EPSA and FCF have lifted ~150% over the same period so we still see good fundamental value in SLC.

Morgans has an add rating and $1.50 price target on its shares.

The post Morgans names the best small cap ASX shares to buy in May appeared first on The Motley Fool Australia.

More reading

• Morgans rates these ASX small-cap shares as best buys
• Morgans names more of the best ASX shares to buy
• Why Avita Medical, NextDC, Predictive Discovery, and Star shares are tumbling today

Motley Fool contributor James Mickleboro 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 Aussie Broadband and Avita Medical. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Camplify. The Motley Fool Australia has recommended Aussie Broadband, Avita Medical, and Camplify. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two of the hottest commodities around right now are copper and uranium.

With demand rising and supply struggling to keep up, prices have been increasing strongly. But how could you gain exposure to copper and uranium on the ASX?

Two ASX mining stocks that analysts at Bell Potter have recently tipped as buys are listed below.

Here’s why they could be in the buy zone right now:

Aeris Resources Ltd (ASX: AIS)

Bell Potter thinks that this ASX mining stock could be a great way to invest in the copper space.

The broker recently responded to the company’s quarterly update by reiterating its buy rating with an improved price target of 30 cents. This implies potential upside of almost 18% for investors over the next 12 months.

Commenting on the company, the broker said:

AIS is a copper dominant producer with all its assets in Australia. On balance, we maintain our production growth forecast for Tritton to which AIS’ financial performance and valuation is highly leveraged. With our higher commodity price forecasts our NPVbased valuation is up 30%, to $0.30/sh and we retain our Buy recommendation.

Lotus Resources Ltd (ASX: LOT)

The broker thinks that this ASX mining stock could be a great option for investors looking for uranium exposure.

Last week, Bell Potter retained its speculative buy rating on the uranium developer’s shares with an improved price target of 60 cents. This suggests that upside of 30% is possible over the next 12 months.

The broker highlights that Lotus Resources has just released an updated mineral resource estimate for the Letlhakane project (LM). This project was acquired through its merger with ACAP Resources.

It notes that “the updated MRE stands at 155.3Mt at 345ppm U3O8 for a total contained 118.2Mlbs U3O8, inclusive of 34.4Mlbs in Indicated Resources.” In response to the above, the broker said:

We maintain a Speculative Buy recommendation and our valuation lifts to $0.60/sh (previously $0.50/sh). Our valuation lift comes from an extension of potential operations at LM beyond our initial forecast (initial LOM production of 61Mlbs). We see positive catalysts at KM [Kayelekera] including 1) MDA finalisation, 2) FID and 3) offtake negotiations. Successful navigation of these hurdles will place LOT in the best position to advance project funding for KM, all whilst LM advances in the background.

Though, it is worth noting that Bell Potter’s speculative buy rating means this ASX mining stock may only be suitable for investors with a high tolerance for risk.

The post Copper and uranium: 2 ASX mining stocks to buy appeared first on The Motley Fool Australia.

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• 2 ASX mining stocks to buy now for returns of 18% to 34%
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• ASX copper stocks in the spotlight as the red metal soars to 2-year highs

Motley Fool contributor James Mickleboro 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.