ASX Penny Stocks: Why DUG Technology and 2 Other High-Growth Small Caps Are Attracting Investor Attention in 2025

The ASX small-cap segment has long been a magnet for investors seeking outsized returns, and 2025 is no exception. Amid a backdrop of market volatility and sector-specific opportunities, three high-growth, undervalued stocks-DUG Technology (ASX:DUG), Kelsian Group (ASX:KLS), and Infomedia (ASX:IFM)-are capturing attention for their potential to deliver transformative returns. While these stocks carry inherent risks, their compelling growth narratives and discounted valuations make them worthy of scrutiny for investors with a high-risk, high-reward appetite.

DUG Technology: Undervalued Amid Operational Uncertainty

DUG Technology, a software company, has been a rollercoaster ride for investors in 2025. Despite forecasts of 43.64% annual earnings growth, the company missed revenue expectations in its full-year 2025 report, triggering a 25% drop in its share price over 30 days. However, its current valuation-trading 83.1% below estimated fair value-suggests a potential disconnect between its market price and intrinsic worth according to company reports.

Recent developments hint at a turnaround. Strategic partnerships, such as its collaboration with Saudi Aramco, could unlock high-margin projects and drive revenue expansion. Additionally, the company's Q4 2025 earnings report, scheduled for August 22, 2025, may provide clarity on its path to profitability. While analysts project 19% annual revenue growth over the next three years-well below the 66% industry average-the stock's recent 2.28% price increase and strong orderbook growth indicate lingering investor optimism.

Kelsian Group: A Dividend-Driven Bargain

Kelsian Group, a global operator of transport solutions, has emerged as a standout in the ASX small-cap space. Trading at a price-to-earnings (P/E) ratio under 12x forecasted FY26 earnings, the stock is undervalued relative to its growth prospects. Analysts project a 10% earnings per share (EPS) increase in FY27, coupled with attractive dividend yields of 6.2% in FY26 and 6.9% in FY27.

The company's strategic focus on core market growth-achieved through divesting non-core assets-positions it to enhance long-term value. While its operations span transport and infrastructure, Kelsian's low valuation and recurring revenue streams make it a compelling play for investors seeking income and capital appreciation.

Infomedia: Automotive Tech with Upside Potential

Infomedia, a technology company in the automotive sector, is trading at A$1.70 per share, significantly below its estimated fair value of A$2.15. With a forecasted 20% annual earnings growth and strong cash flow potential, the stock offers exposure to the evolving automotive tech landscape. Its business model, which includes digital solutions for car dealerships, is well-positioned to benefit from industry digitization trends.

Despite its undervaluation, Infomedia faces challenges, including competition from larger players and macroeconomic headwinds. However, its discounted valuation and growth trajectory make it an intriguing speculative opportunity for those willing to tolerate short-term volatility.

The High-Risk, High-Reward Equation

These three stocks exemplify the allure and peril of ASX small-cap investing. DUG Technology's discounted valuation and strategic partnerships, Kelsian's dividend-driven appeal, and Infomedia's tech-driven growth potential all point to asymmetric risk-reward profiles. However, investors must remain cautious: DUG's recent 30-day price drop and projected -26.94% decline over the next three months underscore the volatility inherent in small-cap plays.

Conclusion

For investors with a high-risk tolerance, DUG Technology, Kelsian Group, and Infomedia represent compelling opportunities in the ASX small-cap universe. While their undervaluation and growth potential are enticing, thorough due diligence and a long-term perspective are essential to navigate the inherent risks. As always, diversification and risk management remain critical in any high-growth portfolio.