As the Australian market experiences a modest uplift with the ASX200 closing up 0.36% at 7,997 points, sectors like Energy and IT are leading the charge while Materials lag behind. In this dynamic environment, identifying undiscovered gems such as Australian Ethical Investment can be key to navigating opportunities within small-cap stocks that show potential for growth amid shifting economic indicators and sector performance.

Top 10 Undiscovered Gems With Strong Fundamentals In Australia

Click here to see the full list of 51 stocks from our ASX Undiscovered Gems With Strong Fundamentals screener.

Here's a peek at a few of the choices from the screener.

Australian Ethical Investment

Simply Wall St Value Rating: ★★★★★★

Overview: Australian Ethical Investment Ltd is a publicly owned investment manager with a market cap of A$581.84 million, focusing on ethical and sustainable investment solutions.

Operations: The company generates revenue primarily through its funds management segment, which reported A$110.80 million.

Australian Ethical Investment, a nimble player in the ethical investing space, has shown robust growth with earnings rising 24.6% over the past year, outpacing its industry peers. The company is debt-free and boasts an impressive free cash flow of A$26.78M as of December 2024. Despite a one-off loss of A$8.4M impacting recent results, revenue for the half-year ending December 2024 was A$58.8M compared to A$48.49M previously, reflecting strong operational performance post-Altius integration. However, potential challenges include managing increased operating expenses and navigating integration hurdles from new service offerings while maintaining profitability growth projections of nearly 24%.

• Australian Ethical Investment's integration of Altius Asset Management boosts revenue growth and operational efficiencies. Click here to explore the full narrative on Australian Ethical Investment.

Carlton Investments

Simply Wall St Value Rating: ★★★★★☆

Overview: Carlton Investments Limited is a publicly owned asset management holding company with a market capitalization of A$826.56 million.

Operations: Carlton Investments generates revenue primarily through the acquisition and long-term holding of shares and units, amounting to A$42.01 million.

Carlton Investments stands out with its high-quality earnings, supported by a solid 3424x coverage of interest payments through EBIT. The company has shown consistent growth, with earnings increasing at an average of 4% annually over the last five years. Recent announcements highlight a net income rise to A$20.3 million for the half-year ending December 2024, up from A$19.68 million previously. Carlton's financial health is robust, as it holds more cash than total debt and offers attractive dividends like the recent fully franked interim dividend of A$0.45 per ordinary share paid in March 2025.

• Unlock comprehensive insights into our analysis of Carlton Investments stock in this health report.

• Examine Carlton Investments' past performance report to understand how it has performed in the past.

Energy One

Simply Wall St Value Rating: ★★★★☆☆

Overview: Energy One Limited offers software solutions, outsourced operations, and advisory services for wholesale energy and carbon trading markets in Australasia and Europe, with a market cap of A$397.90 million.

Operations: Energy One Limited generates revenue primarily from its energy software industry segment, which reported A$55.81 million. The company's cost structure and specific financial metrics are not detailed in the provided data, but it is implied that their operations span across Australasia and Europe.

Energy One, a promising player in the software industry, has shown remarkable earnings growth of 273% over the past year, outpacing the industry's 4.9%. With a satisfactory net debt to equity ratio of 22.7%, it seems financially sound and its interest payments are well covered at 4.5x by EBIT. Recent inclusion in the S&P/ASX All Ordinaries Index highlights its growing recognition. The company reported A$28.71 million in sales for the half-year ending December 2024, with net income reaching A$2.46 million compared to a loss previously—indicating strong recovery and potential for future growth.

• Energy One's strategic global expansion and cybersecurity investments aim to enhance service differentiation. Click here to explore the full narrative on Energy One's potential growth strategy.

Make It Happen

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include ASX:AEF ASX:CIN and ASX:EOL.

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