The ASX small-cap stock Baby Bunting Group Ltd (ASX: BBN) has made a significant recovery since reporting in August 2025, as the chart below shows, and the signs are promising for further gains in the next few years.
Currently trading at $2.96, Baby Bunting says it's the leading specialist baby retailer in Australia and New Zealand with 75 stores. The company says that the $6 billion market it operates in is growing and resilient.
After a challenging period, with lower margins amid strong competition, the company seems to have turned a corner.
The company reported good numbers in FY25, with sales growth of 4.7% to $521.9 million, a 340 basis point (3.40%) rise in the gross profit margin to 40.2%, underlying net profit growth of 228% to $12.1 million, and statutory net profit growth of 462% to $9.5 million.
The balance sheet has also improved, with net debt reaching $4.6 million at June 2025, up from $13 million at June 2024.
For me, FY26 and beyond look very promising for the ASX small-cap stock.
Image source: Getty Images
Strong outlook for the ASX small-cap stock
The 2026 financial year has started strongly – in the first six weeks, total sales grew 4.8%, with Australian comparable sales growth of 3.7% and New Zealand comparable sales growth of 13.9%. That alone suggests another good year, combined with the company's gross profit forecast of 41% in FY26 (up from 40.2% in FY25).
In FY26, the group plans to open five new large format stores, three new small format pilot stores in the first half, and a further two to three planned for the fourth quarter of FY26, depending on the success of the pilot stores. It has a long-term plan of around 80 additional stores, with 40 large format stores and up to 40 small format stores. The greater scale could help with improving profit margins.
FY26 underlying net profit is expected by the ASX small-cap stock to be between $17 million to $20 million, implying at least 40% growth year over year.
The forecast on Commsec suggests the earnings per share (EPS) could reach 13.1 cents in FY26, 18 cents in FY27, and 22.4 cents in FY28. This means it's trading at 22x FY26's estimated earnings and 13x FY28's estimated earnings.
