The investment team at WAM Microcap Ltd (ASX: WMI) are always looking for opportunities that could allow the listed investment company (LIC) to outperform the ASX share market.

Wilson Asset Management has outlined two Australian businesses that could make excellent returns from here. Let's dive in.

Stealth Group Holdings Ltd (ASX: SGI)

The first Australian share to tell you about is Stealth Group, which WAM described as a business-to-business wholesaler and distributor of hardware, industrial, safety, and consumer products.

In mid-June, the company released a strategy and trading update that reaffirmed its previous guidance for another record year, with FY26 preliminary unaudited net profit after tax (NPAT) of $5.8 million, exceeding expectations.

WAM also noted that the company reiterated its long-term targets for annual sales of $500 million and an operating profit (EBITDA) margin of between 8% to 12% in FY28. The investment team noted that the Stealth Group share price increased significantly after this announcement.

The investment team concluded:

We see scope for further re-rating of the share price over the next 12 months as the market continues to recognise the strength of Stealth's earnings and growth outlook.

SharonAI Holdings Inc (NASDAQ: SHAZ)

The other Australian share WAM wanted to highlight is SharonAI. It's not listed on the ASX, though it reportedly plans to list on the ASX boards in the first half of FY27, according to WAM. For now, it's an Australian business listed on the NASDAQ.

The investment team described SharonAI as an Australian sovereign artificial intelligence (AI) infrastructure provider.

WAM noted that during June, the company announced a significant six-year strategic compute collaboration with Nvidia to enable 72MW of new data centre capacity in Australia.

The companies plan to deploy Nvidia's DSX AI factory design and scale up to 40,000 Grace Blackwell GB300 graphics processing units (GPUs), specialised chips used to power AI workloads, to meet demand from AI startups, enterprises, and university researchers.

After that agreement, SharonAI's total AI factory capacity increased to 132MW, with 102MW contracted to end customers.

WAM noted that the company expects to have more than 55,000 total Nvidia GPUs deployed by mid-2027.

WAM Microcap said it invested in SharonAI as a pre-initial public offering (IPO) investment in December 2025 at US$1 per convertible note. It listed on the NASDAQ in February 2026 at US$30 per share, and the notes were converted into ordinary shares in June 2026.

Since listing, the SharonAI share price has increased by 182.2% as of 30 June 2026.

WAM concluded its thoughts on the Australian share with the following:               

We maintain a positive outlook towards SharonAI and believe news flow is likely to remain positive over the near term.

The post 2 small Australian shares with big potential appeared first on The Motley Fool Australia.

One month, the market is excited about scale, growth, and opportunity. The next, investors are worrying about dilution, capital raises, and whether management is moving too quickly.

That seems to be the current debate around Stealth Group Holdings Ltd (ASX: SGI).

The ASX small cap has had a wild few months. After reaching all-time highs in January 2026, Stealth shares are now down around 30% from that peak. Yet the share price has also rebounded more than 40% in May alone.

That kind of volatility can be uncomfortable. But it is also fairly stereotypical of smaller-listed companies, particularly those trying to grow quickly through acquisitions and operating leverage.

So, after the pullback and rebound, is Stealth still one of the more interesting ASX small caps to watch?

What does Stealth Group do?

Stealth is a diversified distribution company that supplies products and solutions to businesses, trade customers, and retail consumers across Australia.

It operates across two main divisions: hardware and industrial distribution, and consumer products.

That means the business sits in several practical end markets at once. It supplies hardware, safety, industrial, maintenance, repair, and operations products, while also distributing consumer products and technology accessories through retail channels.

Following its acquisition of Hardware and Building Traders (HBT), Stealth has become a much larger business. HBT added around 1,165 independent stores, approximately $700 million in annual member purchases, and roughly 490 supplier relationships.

The deal also helped position Stealth as a major independent alternative in the hardware and industrial supply market.

That is the strategic attraction here.

Stealth is not trying to reinvent the wheel. It is trying to build scale in fragmented markets, use that scale to improve procurement power, expand exclusive and private-label brands, and drive better margins across a larger platform.

The latest result showed real progress

Stealth's half-year result was strong on the surface.

For the first half of FY26, the company reported gross sales of $82.2 million, up 11.8%. Revenue came in at $72 million, while operating earnings (EBITDA) rose 18.8% to $5.3 million.

Net profit after tax (NPAT) increased 51.4% to $1.6 million.

That is the kind of operating leverage investors like to see. A modest increase in revenue produced a much stronger jump in profit, suggesting the business is beginning to scale.

However, the per-share result tells a more complicated story.

Stealth issued a significant number of shares to help fund the HBT acquisition. That increased the share count materially, meaning existing shareholders absorbed dilution immediately, while the full earnings benefit of HBT will take longer to appear.

This is one of the central tensions in the investment case.

On the one hand, acquisitions can accelerate growth. On the other hand, they can dilute existing shareholders if the new earnings do not arrive quickly enough.

The balance of risk and reward

There are a few clear risks to watch.

The first is dilution. The recent notice of an extraordinary general meeting may have unsettled some investors, particularly the resolution seeking to refresh the company's 15% placement capacity. That does not guarantee another capital raise, but it does remind shareholders that acquisitions and growth funding can come at a cost.

The second risk is execution. Integrating HBT, capturing synergies, expanding private-label brands, and improving margins all sound attractive. But each requires disciplined management.

The third is valuation. Even after falling from its highs, Stealth is no longer an overlooked microcap trading on sleepy expectations. Investors now expect growth.

Foolish Takeaway

Stealth is not a simple story anymore.

It has gone from a small distributor to a much more ambitious national platform with scale, procurement leverage, and a clear FY28 target.

The opportunity is obvious: If management delivers, Stealth could become a far larger and more profitable business.

The risk is equally clear: shareholders need the earnings growth to justify the dilution, the acquisitions, and the volatility.

That makes Stealth one to watch closely rather than blindly chase. For investors who can tolerate small-cap swings, this may be a company worth keeping on the radar as the HBT contribution becomes clearer over the next few reporting periods.

The post Could this rebounding ASX small cap still have a long growth runway? appeared first on The Motley Fool Australia.

Fund manager Wilson Asset Management has outlined two businesses in the WAM Microcap Ltd (ASX: WMI) portfolio that could be good performers in the coming years.

WAM Microcap, a listed investment company (LIC), is looking for the "most exciting undervalued growth opportunities in the Australian micro-cap market".

Let's take a look at which small businesses WAM likes.

Stealth Group Holdings Ltd (ASX: SGI)

The fund manager described Stealth Group Holdings as a diversified, multi-channel distribution business that supplies industrial, hardware, safety and consumer products to trade and retail customers across Australia.

During November 2025, the Stealth Group Holdings share price increased sharply (up 60%) after the company announced the acquisition of Hardware & Building Traders (HBT), Australia's largest privately-owned hardware and industrial buying group.

The acquisition significantly increased the ASX small-cap stock's scale, expanding distribution points from 32 to more than 1,200 independent retail and trade stores in Australia, raising purchasing volume by approximately $700 million and adding around 490 suppliers in the ecosystem.

The company increased its FY28 targets to more than $500 million in sales and provided profit margin targets that imply up to $40 million in net profit after tax (NPAT). The fund manager believes these targets are "relatively conservative" in the context of the "significant synergy potential and the company's ability to undertake further acquisitions over time, none of which are included in these targets".

Wilson Asset Management concluded on the ASX small-cap stock:

Whilst the share price increased by more than 60% over the month as investors priced in stronger medium-term growth and returns from the enlarged platform, we continue to see substantial re-rating potential.

EML Payments Ltd (ASX: EML)

WAM described EML Payments as a global payments solutions company that powers business processes "seamlessly for growth and exceptional customer experiences".

During the month, the EML Payments share price fell 11% after the company revealed operating trends that were weaker than expected at its annual general meeting (AGM).

The company's FY26 first quarter update revealed a decline of underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of approximately 42% year over year, as well as a small decline in revenue. But, the company did reaffirm its full-year EBITDA guidance.

WAM noted that the update was interpreted by the market as a "weak" trading result, with soft top-line momentum.

Why does the fund manager like the ASX small-cap stock, considering these headwinds? WAM said:

Led by Chief Executive Officer Anthony Hynes, we continue to have confidence in his ability to execute on the turnaround and drive a re-rating of the share price.

The EML share price is now down around 30% in the past six months, making it a lot cheaper for interested investors.

The post 2 ASX small-cap stocks this fund manager thinks are buys appeared first on The Motley Fool Australia.

With limited liquidity and smaller revenue bases, it doesn't take much for a well-executed strategy to spark a powerful re-rating.

That's exactly what's happened to Stealth Group Holdings Ltd (ASX: SGI).

Over the past 12 months, the Perth-based distribution company has quietly climbed over 275%, turning from a microcap into a serious small-cap contender with one of the strongest growth stories on the market.

What does Stealth Group do?

Stealth Group is a diversified Australian distribution company delivering products and solutions to businesses, trade professionals, and retail consumers across multiple sectors.

Through its two divisions — Industrial & Hardware Distribution and Consumer Products — Stealth operates a multi-channel model that reaches customers across both business and retail markets.

Its industrial arm supplies maintenance, repair and operations (MRO) products such as PPE, tools, fasteners, and consumables through a network of more than 40 branches and stores and 1,100 suppliers. It services more than 40,000 trade and business customers across mining, construction, and government.

Meanwhile, the consumer division distributes and designs tech accessories and everyday products for major retailers like JB Hi-Fi Ltd (ASX: JBH), Coles Group Ltd (ASX: COL), 7-Eleven, Officeworks, and The Good Guys, reaching 3,500 retail stores nationally.

It's a business model that blends wholesale, retail, and e-commerce channels and that flexibility has become one of Stealth's biggest advantages.

What has happened in the past 12 months?

FY25 was a breakout year. Stealth reported record sales of $145.1 million, up 27.6%, while operating earnings (EBITDA) jumped 62% to $9.9 million and net profit more than doubled to $3.1 million.

Margins improved thanks to disciplined cost control and operating leverage, while net debt dropped 37% to $6.8 million, the lowest in five years.

The company also expanded its exclusive and private-label brands, including CAT, WESCO, Harden Tools, Belkin, CASETiFY, Ember, and RIVO Safety, and launched two new ventures: Tool Hire and United Supply Co, an online retail platform.

Then, on 10 November 2025, Stealth announced a transformational acquisition: Hardware & Building Traders, Australia's largest privately owned hardware buying group.

The $22 million all-cash deal adds 1,165 independent stores, $700 million in annual purchases, and a vast network of 490 suppliers. The transaction upgrades Stealth's FY28 sales target from $300 million to more than $500 million, cementing its position as Australia's leading independent alternative to Bunnings.

A micro cap no more

Stealth's story is a reminder of how quickly market perception can change when fundamentals align.

It has turned from a little-known distributor into a scaled national operator with a clear path to higher margins and stronger cash flows.

While the share price has already run hard, Stealth's trajectory shows what's possible when a small business finds its formula and executes relentlessly.

It might not be a buy today, but it's certainly one to watch as this ASX small cap continues its climb toward the big leagues.

The post The stealth success story behind this ASX small cap's 275% share price rally appeared first on The Motley Fool Australia.

Stealth Global shares had closed at just 8.3 cents a share yesterday, but opened at 10 cents a share this morning and rocketed as high as 18 cents a share in early trading (up 80%) before settling to the current share price.

Although today's move is a dramatic one, it actually leaves Stealth Global up just 10% year to date (YTD) – it was down 20% YTD on yesterday's closing price. 

So who is this company? And why is Stealth Global exploding in value (and volatility) today?

An intro to Stealth

Stealth Global is a supplier and distributor of industrial and safety workplace products and essentials. The company describes itself as an Australian multinational distribution group headquartered in Perth, Western Australia. It operates across Australia, United Kingdom and Africa as its primary markets, and other select international markets.

The company's network revolves around 3 operating brands in the workplace supplies space: Heatleys Safety and Industrial, Industrial Supply Group, and BSA Brands. Heatleys is a broad range supplier and distributor of safety and industrial products in Australia, whereas BSA Brands performs a similar function for the United Kingdom and African markets

Industrial Supply Group, however, performs a slightly different function. It is a "member-based buying group" or coalition of sorts, that collaborates with major brands in the industrial equipment space in a wholesale network. These include well-known brands like Sutton Tools and WD-40.

Overall, Stealth Global stocks more than 300,000 products from roughly 1,060 suppliers. Over 40,000 line items are stocked in the company's distribution centres and stores.

Stealth Global has been weathering a difficult 2020 well. In its full-year results for FY2020, the group reported revenue growth of 8% to $68.1 million, and earnings (underlying EBITDA) growth of 68% to $3.2 million. The Australian market remains the crown jewel for Stealth Global though — providing 83% of FY20's sales, which were up 36% on last year's numbers.

Why is the Stealth Global share price rocking today?

The stellar performance of the Stealth Global share price has likely been sparked by an ASX announcement the company released to the markets today just before open. The company has reportedly reached "an agreement in principle" to acquire 100% of the shares of the Brisbane-based C&L Tool Centre Pty Ltd (a private company). 

The reported price tag is $3.83 million, a figure that Stealth Global claims represent 3x FY20's earnings for C&L.

The $3.83 million figure will be made up of $2.45 million in cash, $480,000 in new Stealth Global shares, and $900,000 in deferred payments over the following 12 months after the acquisition is settled on 1 December.

The company had the following to say on the announcement:

C&L is very complementary to the existing Stealth business with similar customer base, suppliers and services that provide the basis in ease of integration, synergies, and expansion. It has solid long-term stakeholder relationships and high-quality products, services, and solutions. These include product sales, fulfilment, distribution, and a service department to large multi-national corporations, large domestic companies, small-to-medium business enterprises, schools and universities, and government agencies.

At the time of writing, the Stealth Global share price is up by 32.53% to 11 cents a share.

The post ASX stock of the day: Stealth Global (ASX:SGI) shares explode 32% on acquisition news appeared first on The Motley Fool Australia.