Top brokers have slapped a “buy” on these two small cap stocks

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The big market sell-off has put several ASX large cap shares in the bargain bin but there’s plenty of cheap shares to snap up at the smaller end of the ASX as well given that small caps have underperformed their larger peers.

The S&P/ASX SMALL ORDINARIES (Index:^AXSO) (ASX:XSO) has fallen 14% since the of the August profit reporting season while the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index has shed 12% over the period.

ASX stocks tried making a comeback today but couldn’t hold on to early gains as our market finished marginally in the black.

If you are looking for buying opportunities among small cap ASX stocks, there are two that top brokers are rating a “buy”.

Jetting Ahead

UBS nominates Webjet Limited (ASX: WEB) as a standout among emerging stocks under its coverage.

The Webjet share price had taken a beating recently as investors dumped the stock on worries that the particularly hot European summer would hurt demand for travel.

“While the hot Euro summer may take some of the gloss off the FY19 result, we believe our forecast organic EBITDA growth of +17% in FY19E (+13% ex. B2B Asia) is achievable, and we also view the weather impact as a one off, with FY20E growth benefiting from a normalised Euro summer,” said UBS.

“We focus on FY20E multiples (once Thomas Cook “TC” and Destinations of the World “DOTW” contribute), whereby WEB’s FY20E PE drops to 12.2x – while offering 3yr EPS CAGR (FY20-23E) of +11% (with potential upside risk to our forecasts).”

UBS has a “buy” rating on the stock with a price target of $20.20 per share.

Jumbo Buy

Meanwhile, Morgans is picking the Jumbo Interactive Ltd (ASX: JIN) share price as the one to back following the online lottery company’s upbeat trading update.

“FY19 TTV [total transaction value] is forecast to grow 44% to about A$264.1m,” said the broker.

“The operating leverage within the business is also being illustrated with EBITDA growth of 66.5%, resulting in expected EBITDA [earnings before interest, tax, depreciation and amortisation] of about A$32.3m.”

The broker is also impressed with Jumbo’s white label “Powered by Jumbo” platform offering with the company signing up the Mater Foundation to use the recently launched service.

Morgans has an “add” recommendation on the stock with a price target of $10.70 a share.

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