ASX small-cap shares are often some of the most exciting ideas to buy because of how they may be undervalued relative to their potential.
Many of the largest companies have reached a mature stage where revenue growth is now fairly subdued. Smaller companies are much earlier on in their growth journey, so there's much more compounding potential for earnings to grow in the future.
The business I'm going to highlight today is Beacon Lighting Group Ltd (ASX: BLX). It's one of the top picks inside the investment portfolio of WAM Microcap Ltd (ASX: WMI), a listed investment company (LIC) that targets some of the smallest ASX stocks to generate returns for shareholders.
The WAM investment team recently highlighted why they think the business is an opportunity.
Image source: Getty Images
Accelerating sales momentum for the ASX small-cap share
The Beacon Lighting share price has taken a bit of a beating in recent times; it's down by 42% over the past year, at the time of writing.
At this lower price, it could be undervalued, and WAM is attracted to the specialist residential and commercial lighting retailer.
In August 2026, the Beacon Lighting share price rose strongly (up 18.7%) after the release of its FY26 results.
That 2026 annual report showed record underlying sales of $340.3 million and continued momentum across its growing trade division.
FY26 trade sales grew by 14.5% during the year and represented more than 43% of relevant sales, which highlighted the "success of the company's strategy to expand its exposure to commercial customers".
The WAM investment team also noted that the Beacon Lighting share price responded positively to accelerating sales momentum, with comparable store sales increasing 7.1% in the fourth quarter of FY26.
Wilson Asset Management said that this momentum has continued into the start of the 2027 financial year.
The fund managers and analysts overseeing WAM Microcap remain positive on Beacon Lighting Group's outlook, citing its strong balance sheet and multiple growth opportunities, including store expansion, digital initiatives, and increased trade penetration.
What is the Beacon Lighting valuation?
According to the projection on CMC Invest, the ASX small-cap share is valued at 14 times FY27's estimated earnings. The business is also projected to pay an annual dividend that equates to a dividend yield of 4.25% excluding franking credits and 6.1% including franking credits.
The forecast on CMC Invest suggests the business could see further earnings growth in FY28, with potentially 10% profit growth. The dividend could also increase again.
At those valuations, I can see why WAM thinks the ASX small-cap share is a compelling buy.
