Why invest in small-cap stocks? Look at small-cap IT stocks

The Australian Stock Exchange has a separate index, S&P/ASX Small Ordinaries (AUD), this is utilised as a benchmark for tracking the performance of small-cap stocks. MSCI Australian Shares Small Cap Index also tracks small capital companies in Australia.

The S&P/ASX Small Ordinaries index has shown substantial growth with a 20.38% return in the last one year, 8.47% return in last three years, 8.82% return in the last five years, and 1.37% in the last ten years.

This consistent growth of the index motivates an investor to invest in small-cap stocks as they provide a higher rate of return compared to other stocks. Another reason for investing in small-size companies is the high growth potential which a small business operation possesses. Such companies are usually in the developmental stage of the business cycle and thus, have a significant amount of time to reach the maturity level. This makes it an excellent time to invest in small-cap companies.

Among the multiple sectors small-cap companies operate in, information technology is gaining huge attraction as the future lies in technologies such as artificial intelligence and machine learning which are incorporated by many small-cap companies in Australia. These technologies are used in almost every industry, be it healthcare, travel management or even human capital area (e.g., Gooroo Ventures Limited (ASX: GOO)).

Alcidion Group Limited (ASX:ALC)

An ASX-listed company, Alcidion Group Limited is engaged in licensing of healthcare software products and reselling selected products through tactical partners. The company was incorporated in 2011 and uses predictive analysis/algorithms to create products including Smartpage, Patientrack, Miya MEMRs and Miya Precision.

Alcidion has well-aligned technology in the business of healthcare sector with its products gaining momentum in today’s world of digitalization. In FY2019, the company recorded $16.9 million in revenue, with operational cash inflow of $2 million and a 98% improvement in EBITDA.

As per the company’s strategic plans, two different deals have been signed with companies. The company entered into an agreement, worth $1.9 million, on 27 December 2019 with Dartford and Gravesham NHS Trust for supervising medications in the UK. On 19 December 2019, Alcidion signed an agreement with Taunton and Somerset NHS Foundation Trust worth $500,000 for the improvement of patient care.

Stock Performance

On 17 January 2020, the stock of ALC was trading at $0.200 (at 03:04 AEDT), an increase of 2.564% compared to the previous closing price. The company has outstanding shares of around 990.69 million and a market capitalisation of nearly $193.19 million. The 52 weeks low and high price of the stock is $0.038 and $0.305, respectively. The stock has delivered a positive return of 12.5%and 309.09% in the last six months and last one year, respectively.