Small-cap stock Matrix Composites & Engineering Ltd (ASX: MCE) is in focus after its share price soared 9.5% higher on Thursday.
The company provides subsea umbilicals, risers and flowlines (SURF) buoyancy and corrosion protection solutions to offshore oil and gas projects.
Based on an updated price target from Bell Potter, it still has significant upside.
Why did shares rise on Thursday?
Markets reacted positively to the company's 2025 AGM, which included a positive FY26 outlook.
The company announced $70m of FY26 secured revenue (including YTD sales), comprising $65m of contracted Subsea work.
It reiterated a strong quotation pipeline for drilling and SURF markets, with opportunities currently under negotiation likely to add to the FY26 orderbook upon conversion.
The team at Bell Potter stated that, in addition, revenue, EBITDA, and profitability will be weighted towards 2H FY26, with EBITDA expected to be positive in FY26.
Why does this matter?
For a small-cap stock, guidance that EBITDA will be positive in 2026 is a big deal because it signals a fundamental shift in the company's financial health and risk profile.
Essentially, it marks a transition from "cash-burn" to "self-funding."
Many small-caps – especially in tech, biotech, clean energy, and early-stage industries – operate with negative EBITDA, meaning their core operations are unprofitable.
A move to sustained positive EBITDA in 2026 is significant because, although the company has hovered around breakeven and even turned positive before, long-term projections from Bell Potter show a durable and expanding profitability trend.
This shift signals that the business model is stabilising and scaling, reducing future funding risk and increasing investor confidence in lasting growth.
Is this small-cap stock a buy, hold or sell?
While the guidance of a positive EBITDA is good news, Bell Potter remains cautious about this small-cap stock.
In a report from the broker yesterday, it maintained its hold recommendation, but lowered its target price to $0.26 (previously $0.28).
Bell Potter said phasing of major work has driven a worse-than-expected impact on revenue, EBITDA and profitability in 1H FY26, driving a downgrade to our 1H FY26 EBITDA estimate from $1.8m to -$0.6m.
On a positive note, it said a strong skew to 2H FY26 EBITDA and profitability should drive positive FY26 EBITDA (BPe $6.2m, +25% YoY).
Matrix Composites & Engineering Ltd has flagged further pipeline opportunities that could support FY26 project deliveries upon conversion, potentially representing upside to our forecasts.
Matrix Composites & Engineering shares closed yesterday at $0.23 after the 9.5% jump.
Based on the updated price target of $0.26, there is an estimated upside of approximately 13% for this ASX small-cap stock.
