The fantastic four ASX small caps taking the US market by storm

Guzman Y Gomez's expansion plans may have dominated headlines in recent weeks but there are other companies with their sights set firmly on the US market. Do they have what it takes to succeed?

After a recent research trip to the US and speaking to a number of Australian listed businesses with key operations in North America, we have a good feel of where the US economy is heading, how these companies feel about their prospects, and how their businesses may be impacted by macro developments and political process.

Here are four high-quality ASX stocks we believe stand a good chance of proving themselves offshore.

1. Pro Medicus (ASX:PME)

Australian-founded diagnostic imaging software provider Pro Medicus (ASX:PME), has built up its client base globally, with the United States not only its largest market today but also a region for growth opportunities.

Historically, the company's software solutions were most suited to academic and large hospital groups, but recent contract wins have shown that Pro Medicus' solutions are suitable for the private practice segment, which account for about 25% of the market.

This previously untapped market is gravitating to Pro Medicus' products, which are modularised and cloud deployed, features where Pro Medicus is superior to its competitors.

To support this growth into the private market and to respond to the increased interest in its offer, Pro Medicus has boosted its sales team by around 20%. This is a positive signal on the shape and size of the contract pipeline in the US market.

Cyber security, privacy and data compliance risks are another emerging area that is gaining traction in the US healthcare sector. Hospital boards are increasingly prioritising solutions that mitigate these risks, which plays into the sweet spot of SaaS solutions such as those offered by Pro Medicus.

2. Infratil (ASX:IFT)

Infratil (ASX:IFT) is an infrastructure investment company that holds a variety of US energy assets, including Long Road Energy, a US renewables developer, owner, and operator.

Long Road Energy was one of the few developers who partnered early with US solar panel manufacturers (e.g. First Solar) to ensure they meet the domestic content threshold to be eligible for additional tax credits made available as part of the Inflation Reduction Act (IRA).

There are some concerns in the market about the potential for a Republican win at the November US elections and the implications for the IRA.

But after our conversations with numerous renewable industry contacts in the US, we feel confident that these risks are likely to be minimal,

Many of the supporting supply chains relevant for renewable projects are operating from Republican states, with safe harbour protections to prevent repealing of prior legislation.

We remain confident in the strong growth runway for Long Road Energy.

3. PWR Holdings (ASX: PWH)

PWR Holdings (ASX: PWH), a manufacturer of liquid cooling plates and brazed chassis, is a well-established provider to all 10 Formula 1 teams.

It's facing some growing pains on the factory floor as it scales up to meet rapid demand growth.

However, we believe the company's recent appointment of an experienced new head in the US will address these bottlenecks and implement manufacturing efficiency programs.

The company has a strong growth pipeline, especially within the defence and aerospace market segment.

Competition for highly specialised manufacturing of cooling products and cold plates in this segment is extremely limited and PWR is in the box seat to service the major US defence prime contractors, following a defence certification process which we expect to conclude over the next 12 months and bring with it a string of contract awards.

Thematically, increasing geopolitical tensions are resulting in compounding defence spending, especially in a world where combat is taking the form of drones and precision missiles, an area which will nicely benefit from the cooling and engineering intellectual property offered by PWR.

4. Audinate (ASX: AD8)

Audinate (ASX: AD8) is a global provider of professional AV networking technology which launched into the US market in 2008.

Since then, the company has established itself as the leader in digital audio networking, offering reliable and vendor/brand agnostic solutions to AV professionals across the world. Audinate has also recently launched products in the video market, an opportunity twice as large as its core audio market.

It was clear to us from our interactions with Audinate customers, including Rutgers University, that it should replicate its vendor-agnostic "works every time" philosophy, and there will be no shortage of AV professionals rushing to move onto its expanding video platform.

While the company recently downgraded growth expectations for 2025, we view this as a short-term headwind that has arisen as a result of previous pull forward in demand post the pandemic.

Although visibility remains short in the near term, we remain confident that Audinate's superior competitive positioning will allow it to continue to gain audio market share, and that there is a long runway for growth available to the business if it can also successfully penetrate the video networking market.

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