The ASX small-cap share space could be a great place to find under-researched but highly potential businesses.

The fewer professional analysts looking at a stock, the higher the chance of that business slipping under the market's radar and being priced too cheaply for its potential.

However, not every small company is destined to become a larger one. Therefore, I think it's essential for investors to be selective about which ASX small-cap shares they buy.

The investment team that manages the listed investment company (LIC) WAM Microcap Ltd (ASX: WMI) has revealed two stocks it considers appealing picks. Let's dive into what those potential opportunities are.

EML Payments Ltd (ASX: EML)

WAM described EML as a global payments company that operates in Australia, the United Kingdom, Europe and the United States.

The EML share price had an exciting November, climbing a hefty 57% during the month, as shown in the chart below.

The fund manager noted that business soared after the company held an investor day with EML Payments new management team, which outlined the ASX small-cap share's growth ambitions.

As WAM highlighted, EML set out an FY28 target for earnings per share (EPS) of 13 cents, and an operating profit (EBITDA) margin target of 35%, which "eased market concerns, contributing to an increase in EML Payments' share price".

The investment team concluded their optimistic view on the EML Payments shares with the following:

We remain positive on EML Payments' medium-term plan and see upside to its underlying EBITDA guidance range of $54 million to $60 million in FY25.

Paragon Care Ltd (ASX: PGC)

Paragon Care is an Australian healthcare company that supplies a wide range of medical equipment, consumables, and services to hospitals, aged care facilities, and healthcare professionals.

The Paragon Care share price climbed 19% in November.

WAM noted that the ASX small-cap healthcare share held its annual general meeting last month. At the meeting, chair Peter Lacaze pointed out that the ASX small-cap share has made significant progress on its merger with CH2, a "leading Australian integrated distributor and wholesaler of pharmaceuticals, medical consumables and healthcare equipment".

WAM suggested that the approved merger between Chemist Warehouse and Sigma Healthcare Ltd (ASX: SIG) could be positive for Paragon Care if independent pharmacies decide to leave Sigma Healthcare after the merger is completed.

In final thoughts on the ASX small-cap share, the fund manager said:            

Paragon Care's first quarter results for FY25 beat market expectations and we see strong momentum for the business going forward.