20 top small-cap share tips for 2026

Small-cap stocks Synthomer (LSE:SYNT), AFC Energy (LSE:AFC) and PureTech Health (LSE:PRTC) have been backed to more than double their value after a City bank named 20 top picks worth under £400 million.

Peel Hunt’s annual year-ahead selection of smaller stocks with value or growth attributes also features the inclusion of AB Dynamics (LSE:ABDP), Gym Group (The) (LSE:GYM) and On The Beach Group (LSE:OTB).

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Last year’s 20 picks delivered a weighted-average return of 36% and an average return of 22%, with the standout performers being Serabi Gold (LSE:SRB) and Wickes Group (LSE:WIX).

This year’s crop spans 12 sectors, led by four from support services through the selection of Essentra (LSE:ESNT), Ashtead Technology Holdings Ordinary Shares (LSE:AT.), Restore (LSE:RST) and Speedy Hire (LSE:SDY).

The stock with the biggest potential upside on Peel Hunt’s list is biotech PureTech Health after the City firm said the value of its portfolio exceeded its market cap “several times over”.

PureTech holds 100% economic interests in Celea Therapeutics, which is delivering treatments for people with serious respiratory diseases, and in Gallop Oncology.

It returned $100 million (£80 million) to shareholders in 2024, having generated significant proceeds from the schizophrenia treatment business it founded from an initial investment of $18.5 million (£13.7 million) before its sale to Bristol Myers Squibb for £11 billion.

Peel Hunt, which has a price target 305% higher at 508p, said: “Biotech has been punished hard in the last few years, but the indices are rebounding and PureTech provides exposure to a heavily discounted and diverse, mature portfolio of assets.”

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Polymers firm Sythomer has been backed to recover after a grim run that has seen shares slump from 2021’s 4,000p in the FTSE 250 to just 63p. The debt-laden firm is valued at £100 million, despite forecast 2025 revenues of £1.9 billion and underlying earnings of £140 million.

Synthomer, which was known as Yule Catto until 2012, benefited from a surge in demand for its nitrile rubber gloves during the pandemic but this was followed by a prolonged period of industry destocking and increased competition in some base chemicals.

Peel Hunt said the key to a re-rating is the start of disposals as Synthomer looks to bring down its leverage ratio and focus on speciality products with differentiated benefits for end-users.

The City firm acknowledges the risks and sensitivities but also sees a catalyst for substantial potential upside based on a target price of 220p.

AFC Energy shares have been on a downward trajectory since 2021, although Peel Hunt believes there’s cause for optimism in 2026 due to various milestones across its core fuel cell and ammonia cracker offerings.

It points out that AFC raised £27.5 million during 2025 to accelerate the commercial roll-out of its three core product areas. The bank, whose target price is 107% higher at 23p, added: “We believe our assumptions remain conservative at this stage, and that our forecasts are achievable given the significant progress by the new leadership team.”

Peel Hunt believes AB Dynamics holds the right strategy for a changing automotive industry, having developed from being a supplier of testing products and services into an integral part of new vehicle development processes. 

Medium-term targets are for 10% organic growth, with a similar contribution from acquisitions and margin progress towards 20%. If these targets are met, Peel Hunt believes the current valuation discount is unsustainable based on a price target 85% higher at 2,400p.

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Among other stocks with big forecast upside, Ashtead Technology is seen more than doubling to 725p as the bank believes the subsea equipment rental firm’s flexible and diversified model is not fully appreciated by the market.

It adds: “Management’s growth aspirations remain well founded, and the cash generation should facilitate continued consolidation of highly fragmented markets.”

Confidence in the growth potential of components business Essentra means its shares have been backed with a 115% upside to 201p, despite the uncertain near-term market outlook.

The bank adds that North Sea and Malaysia-focused oil and gas firm EnQuest (LSE:ENQ) is at a “compelling entry point” for investors given the growth expectations for this year. Its price target is 133% higher at 24p.

It also believes the online travel agency On The Beach is undervalued on 11 times forecast 2026 earnings and deserves to be 59% higher at 350p, noting that improvements in the platform and app are leading to better conversion and increased rebooking.

The Gym Group shares have risen 15% to 163.6p in the past year but Peel Hunt sees room for further growth to 225p. Its confidence was backed up by a trading update earlier today when the operator of 260 gyms forecast annual results slightly above the top end of City hopes.

The low-cost chain is also accelerating site openings to take advantage of the space and market growth opportunity, with a target for an additional 75 locations over the next three years.

Peel Hunt said: “The gym market continues to grow robustly, largely driven by low-cost gyms, with Gen Z viewing gyms as a top spending priority.”

The other stocks on Peel Hunt’s list are Central Asia Metals (LSE:CAML), Frontier Developments (LSE:FDEV), MJ Gleeson (LSE:GLE), Helical (LSE:HLCL), Impax Asset Management Group (LSE:IPX), Kenmare Resources (LSE:KMR), LBG Media Ordinary Shares (LSE:LBG), Luceco (LSE:LUCE) and Next 15 Group (LSE:NFG).