The team at Bell Potter has provided updated guidance on two ASX small-cap stocks that indicate big upside in 2026.
Before investing in small-cap stocks, it's important to remember they can come with increased volatility.
Many small-cap companies operate pre-profit, relying on external/government funding for research and development.
This can create large fluctuations in share price.
On the flip side, there is always the possibility of small-cap companies becoming the large-cap stocks of the future.
With this in mind, here are two that have drawn attractive price targets from Bell Potter.
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Biome Australia Ltd (ASX: BIO)
Biome Australia develops and commercialises clinically backed innovative live biotherapeutics (probiotics), marketing 18 products under the 'Activated Probiotics' brand.
Activated Probiotics is a range of live biotherapeutic products aimed to help prevent and support the management of various health concerns.
Its stock price is down more than 30% over the last 12 months. However, it has risen 7% so far in 2026.
The team at Bell Potter released a new report on Biome Australia following its quarterly activities and cash flow report.
Bell Potter said the 2Q26 result was excellent.
Results included:
- Quarterly EBITDA / operating cash flow passing $1m for the first time
- 2Q26 sales had been pre-released and were up c.41% yoy to c.$6.5m
- Cash receipts were up c.43% to c.$6.2m
- Annualised run rate on sales is now c.$26m, while gross margins are being maintained at >61%
The broker has maintained its buy recommendation and 12-month price target of $1 on this ASX small-cap stock.
From yesterday's closing price, that indicates an upside of more than 122%.
We have adjusted our 1H26 estimate to reflect the EBITDA beat, although we are maintaining our FY26 estimates. It is encouraging to see operating leverage begin to flow through to the financial results. Free cash flow generation should be the final hurdle to attracting wider investor interest. We look forward to the HY update that should enable investors to gain further insight into progress on international expansion and brand development through the Mecca partnership.
AML3D Ltd (ASX: AL3)
Bell Potter has also maintained its speculative buy recommendation on ASX small-cap defence stock AML3D Ltd.
This update came after the company's quarterly report yesterday, which included significant order growth.
AL3's December 2025 quarterly report points to increased system orders in the US, emerging demand signals from the UK and European defence sectors and ongoing R&D in Australia to support the next generation of ARCEMY systems.
Bell Potter said the company's order book is now $16.5m, which includes $9m of orders on hand at the opening of FY26 plus more recently announced orders including $1.7m from FasTech (US contract printer), $4.5m from HII (Newport News Shipbuilding ordering two ARCEMY systems), and $1.2m from Austal (for a rapid deployment system).
AL3 retained a strong cash position at quarter-end of $29m (prior quarter $31m), with no debt.
The broker has a price target of $0.40 on this ASX small-cap stock, which indicates an upside of 122%.
AL3's technology is particularly suited to maritime applications, giving it strong leverage into demand growth from the US Navy's Maritime Industrial Base and the US SHIPS Act. Over FY26-27, we expect AL3 to increase deployment of ARCEMY systems to the US and Europe, increase prototyping activity and ultimately commence commercial scale production of components.
