Stealth Group Holdings: A Hidden Gem on the ASX?

As an investor, you're always on the lookout for undervalued stocks with strong growth prospects. Stealth Group Holdings (ASX:SGI), an industrial distribution company, might just be that hidden gem you've been searching for. With a market cap of AUD 56.76 million and an enterprise value of AUD 79.45 million, SGI is a relatively small-cap stock that could offer significant upside potential.



SGI's financial performance has been impressive, with revenue increasing by 2.42% to AUD 113.68 million in 2024, and earnings up by 50.19% to AUD 1.36 million. The company's earnings per share (EPS) also grew by 51.7% to AUD 0.012. This growth is driven by the company's strategic focus on expansion, acquisitions, operational efficiency, and diversification.

One of the primary drivers of SGI's earnings growth is its expansion and acquisition strategy. The company has been expanding its business through acquisitions, such as the acquisition of Force Technology International Pty Ltd for approximately AUD 9.5 million in 2024. These acquisitions can drive earnings growth by increasing the company's revenue base and potentially synergies.



Another key factor contributing to SGI's earnings growth is its improved operational efficiency. The company has been focusing on pricing reviews and initiatives to counter the impacts of rising inventory costs on customer margins. This has led to improved operational performance, as evidenced by double-digit growth in key metrics such as daily sales value, daily gross profit value, daily sales value per order, and daily gross profit value per order.

Despite cost pressure across the broader supply chain, there has been healthy ongoing demand in the Australian industrial consumables sector. This demand, coupled with SGI's strategic investment in building a stronger, larger, more relevant, and diversified industrial supply business, has contributed to the company's earnings growth.

In conclusion, Stealth Group Holdings (ASX:SGI) is a small-cap stock with strong growth prospects, driven by its expansion and acquisition strategy, improved operational efficiency, and healthy demand in the industrial consumables sector. With a market cap of AUD 56.76 million and an enterprise value of AUD 79.45 million, SGI is a relatively undervalued stock that could offer significant upside potential. As an investor, you should consider adding Stealth Group Holdings to your watchlist and monitor its progress closely.