There are a number of great ASX shares that have delivered impressive compounding returns. But, other names may be cyclical opportunities where the strategy works to 'buy low' (and potentially sell when conditions improve). I'm going to highlight an ASX small-cap stock as a compelling idea.
While many Australians may have heard of Inghams Group Ltd (ASX: ING), the scale of the business may be a surprise. It claims to be the largest integrated poultry producer in Australia and New Zealand. The company has also entered into the production of turkey and stockfeed.
The company has 8,200 staff, it supplies major supermarkets, fast food operators, food service distributors and wholesalers. I'll run through why I think the ASX small-cap stock is an attractive opportunity today at $2.55.
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Cheap price
When we invest in a business, we're typically buying them at a certain price/earnings (P/E) ratio, meaning a certain multiple of their earnings.
While buying one business at a lower P/E ratio doesn't necessarily it's better than another with a higher P/E ratio, it does mean gaining access to more of that profit at a cheaper price.
Following challenging conditions over the past couple of years relating to inflation of costs and loss of a Woolworths Group Ltd (ASX: WOW) contract, the Inghams share price has fallen more than 30% from the May 2025 peak.
But, it looks very affordable based on the level of projected earnings for the 2028 financial year and beyond.
Broker UBS is currently forecasting that the business could generate 27 cents of earnings per share (EPS) in FY27 and 31 cents of EPS in FY28. That puts the Inghams share price at around 8x FY28's projected earnings.
It could take time for conditions to recover, which is why I'd focus on a couple of years ahead rather than FY26. However, there are positive signs for the company.
Rebound in operating conditions?
The company said it has put in place initiatives to address its farming and processing issues. For example, it has experienced higher egg costs due to reduced volumes and below-target feed conversion – the ASX small-cap stock explained that corrective actions are in place and delivering improvements, with farming performance expected to return to its target in the second half of 2026.
Inghams also said that its cost reduction program is on track and it expects "improved 2H26 performance and sustainable improvement beyond FY26".
It also revealed in a FY26 trading update that core poultry volumes were slightly higher and the net selling price (NSP) was slightly lower than FY25, leading to an improved revenue outlook."
Wholesale margins are also expected to remain favourable for the company, according to the ASX small-cap stock.
Big dividend predicted
Assuming the business does generate the projected profits, it could be capable of delivering very large dividends for shareholders in the years ahead, though not in the short-term because of FY26 is expected to see a reduced profit.
UBS currently projects that the business could pay an annual dividend per share of 20 cents in FY28. At the time of writing, that translates into a grossed-up dividend yield of close to 13%, including franking credits.
The dividend alone could be a market-beating return, so if the business is capable of growing earnings then it could be a very underrated ASX small-cap stock to consider.
