Sadly, finding these winners early on is far easier said than done. After all, there are hundreds of very small penny shares to pick from. But luckily, institutional investors have already started narrowing down the list with their own research. And as of April 2026, there are three tiny stocks that have the potential to be big winners.

Let’s dive in.

3 top professional picks

The three small businesses that institutional analysts have flagged as potentially terrific buys in 2026 are Synthomer (LSE:SYNT), Topps Tiles (LSE:TPT), and Michelmersh Brick Holdings (LSE:MBH).

Each company is fairly unique, but they all target one end-market: construction.

Synthomer, in addition to other products, supplies specialist polymers used in external paints, architectural coatings, and waterproof membranes for roofs. Topps Tiles is the UK’s leading specialist wall and floor tile retailer, supplying both home renovators and home builders. While Michelmersh is trying to help solve the UK’s chronic shortage of clay bricks.

Each business supplies a different part of the construction sector’s value chain. As such, this basket of stocks appears well-positioned to capitalise on the structural tailwinds created by the government’s commitment to build 1.5m new homes without directly competing with each other.

If the share price forecasts are right, investors could be in for some impressive gains over the next 12 months, and possibly even bigger returns over the coming years.

Needless to say, a combined 51.4% potential gain by this time next year certainly suggests that these businesses might indeed be among the best stocks to buy now.

But what’s the catch?

The risks

Despite the government setting ambitious supportive homebuilding targets, the UK construction sector remains genuinely weak on the back of rising raw material and labour costs, made worse by a continuous unaffordable-housing crisis.

As a result, all three businesses are struggling to achieve meaningful revenue and profit growth, with the pressure only amplified for Synthomer and Topps Tiles, whose balance sheets carry heavy debt burdens.

This impact has only been made worse by the escalating geopolitical environment, with costs being driven even higher.

What does this all mean for investors?

The bottom line

While each company has a genuine path to success, external headwinds could nonetheless prevent them from achieving their full potential. And without deep coffers to help absorb the short-term impact, these penny stocks could see their share prices fall much further before a cyclical recovery emerges.

Personally, out of this basket, Michelmersh appears to be in the strongest position, leveraging superior aesthetics and durability to generate some pricing power in a highly commoditised brick market. In fact, that’s why the company now enjoys the biggest operating margins out of the three.

So, while I’m not 100% convinced that Michelmersh is among the best stocks to buy now, it certainly has enough potential to warrant closer inspection.

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A December trading update told us “there has been a notable slowdown in the construction market.” It was, the company said, all about “a challenging macro-economic outlook and the uncertainty of UK Budget policy announcements, which have adversely impacted both consumer sentiment and investment decision making across the sector.”

The Michelmersh share price is down 15% since the start of 2026, after suffering further in the weeks since the Iran war kicked off. The conflict means an almost certain rise in inflation, and little chance of Bank of England interest rate cuts any time soon. And that seems very likely to cause knock-on pressure on the housebuilding industry.

But I see that as short term, and selling the shares as short sighted.

Builder downturn

I’ve included Taylor Wimpey in the above share price chart, to show how closely the brickmaker’s share price is tied to housing. And to me, that says something very positive. Housebuilding must surely pick up. And when it does, I expect the outlook to turn brighter for Michelmersh too.

Michelmersh is a very small company though, with a market cap of just £65m. And that means it could face serious dangers if its business is disrupted — maybe even if it’s only for a short time. Any financial squeeze could prove painful.

Still, with that latest update, the company said it expects adjusted EBITDA of approximately £12.5m for the full year — with results due 24 March. And there was “a broadly cash neutral balance sheet” at the end of December. The cash situation will deserve close attention, but it’s not too scary.

Even with the risks brought by the latest macroeconomic events, I think this is a penny stock well worth considering for a medium-term recovery.

Forecasts

Looking at broker forecasts, we see an average price target of 135p on the stock. That’s 93% ahead of the price at the time of writing. And the top-of-the-range target of 150p suggests a gain of more than 110%.

Now, these targets haven’t been updated to reflect the last few weeks of turmoil in the Middle East. And it might be some time before we get much of a feel for how the industry could be affected.

But as they stand, forecasts show strong earnings growth between now and 2027. And if they come good, it could mean a price-to-earnings (P/E) ratio of only around eight by then.

What next?

I ask myself… what’s the worst that’s likely to happen? And my gut feel is that we might see the building sector recovery set back by maybe about a year — though that’s an educated guess at best. So would I be happy to wait until 2028 for that predicted low valuation?

For sure, yes. And — even with the clear penny stock risk — that’s why I have Michelmersh on my ISA candidates shortlist.

The post This UK penny stock is tipped to double by City analysts! appeared first on The Motley Fool UK.

Still, for long-term investors, market choppiness can provide a great dip buying opportunity. When conditions improve, earnings at many penny stocks can surge, launching their share prices higher.

Here are three sub-£1 shares I think demand a serious look today.

Michelmersh Brick

It’s not a shock to see Michelmersh Brick (LSE:MBH) shares tumbling. The prospect of rising interest rates is severe as surging oil prices drive inflation. In this climate, demand for new houses could topple.

Yet I think Michelmersh’s 14% share price drop over the past month merits attention. The company now trades on a rock-bottom price-to-earnings (P/E) ratio of 8.4 times.

Make no mistake, the long-term outlook for newbuild demand remains as robust as ever. Industry consultancy Marrons believes 5.4m more homes will be needed in England alone by 2040 to keep up with the booming population. In this climate, brick demand could rocket. Michelmersh is well placed to capitalise on this upswing — it manufactures 125m bricks a year.

Panthera Resources

Gold miner Panthera Resources (LSE:PAT) has dropped 13% in value over the last month. It’s tracked precious metals prices lower as the US dollar has strengthened. A rising buck makes it less cost-effective to buy and hold USD-denominated assets.

I’m confident that gold prices will rebound, however, as the geopolitical landscape becomes more volatile. Adding in fears over global growth, rising inflation, and the long-term direction of the dollar, I’m expecting bullion to rebound strongly as it did earlier in 2026.

Investors have plenty of junior gold miners to choose from. I like Panthera because of the quality of its African mining projects. In January, the company said its Kalaka project in Mali has an exploration target of 3m to 5m ounces of gold. That was up from its earlier estimates of roughly 3m ounces.

Brave Bison

Brave Bison (LSE:BBSN) shares have plunged 8% over the last month. They’ve dropped not only due to broader risk aversion as the Middle East crisis rolls on. Like other tech stocks, the company’s slumped over fears artificial intelligence (AI) will hammer its growth prospects.

This penny share makes and distributes online video content. It’s easy, then, to see how it could be impacted if AI takes off as some predict. Time will tell how far AI disrupts Brave Bison’s operations, though the company sees it as an opportunity and is embracing AI tools itself to drive growth. So far trading remains strong, and revenues here leapt 57% in 2025.

Today the firm trades on a P/E-to-growth (PEG) ratio of 0.2. That’s below the value benchmark of one, and makes the company — like those other penny shares — worth serious consideration.

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With such a star billing, I reckon it’s worth a closer look. So let’s see if the stock can live up to these expectations.

Surprise!

Given that the analysts see such strong growth potential, it might come as a surprise to learn that the company in question isn’t a technology stock at the forefront of artificial intelligence (AI). Instead, it makes bricks.

Michelmersh Brick Holdings (LSE:MBH) is the UK’s largest specialist brick manufacturer and owns seven of the country’s leading premium brands.

But due to a “notable slowdown” in the construction industry in the last quarter of 2025, the group had to re-set expectations in December. Revenue for the full year is now forecast to come in at £69m and EBITDA (earnings before interest, tax, depreciation, and amortisation) is likely to be around £12.5m. By comparison, these were £70m and £14m respectively in 2024.

This lack of growth’s clearly a concern. And with revenue and earnings in the tens of millions rather than the billions, it’s a reminder of how small some listed companies can be.

But these things are relative. That’s why many investors are attracted to penny shares. It’s probably going to be easier (and if all goes to plan, quicker) for Michelmersh to double its earnings – and presumably, its share price – than it is for, say, Nvidia.

Tricky trading conditions

However, for its stock market valuation to go significantly higher, it’s going to need a strong recovery in the building sector. On the positive side, despite the slowdown, the company reported in December that it was experiencing “robust customer demand” for its “diverse product offering”.

However, it also said this had been supported by its “collaborative approach to pricing”. This sounds like price cuts to me. It also warned of “uncertain timing of brick despatches”.

Since February 2025, the group’s share price has fallen 20%. One benefit of this is that new investors can take advantage of a 5.4% dividend yield. This is based on amounts paid over the past 12 months (4.6p). Of course, if the construction industry continues to struggle, there’s a strong possibility that it will be cut. But for now, the stock could appeal to income investors.

My view

Personally, after being in the doldrums since the pandemic, I think there are some green shoots of a recovery starting to show in the sector. And there’s some evidence to suggest that the slowdown in the last quarter of 2025 could be a temporary blip. The uncertainty surrounding the Budget appears to have affected confidence.

Another plus is that the stock trades on a lower earnings multiple than its nearest rival, Forterra, which owns the London Brick Company.

Due to their size, penny stocks can be risky investments. With limited financial firepower, there’s little to fall back on should trading take a turn for the worse. However, with this in mind, Michelmersh could be a stock for more adventurous investors to consider.

The post This penny stock could rocket 76% more, says 1 broker appeared first on The Motley Fool UK.

The FTSE SmallCap Index has risen an impressive 13% over the last year. It could be set for further stunning gains too, as investors pile into cheap penny stocks and other undervalued UK shares.

City analysts believe these British small-caps could surge during the next 12 months and are worth considering. The question is: are these forecasts realistic or simply pie in the sky?

Michelmersh Brick

Michelmersh Brick (LSE:MBH) shares slumped into penny share territory towards the back end of 2025. They dropped as sales weakened in key construction markets. Yet brokers are confident the brickmaker will rebound from this point.

Of the four rating the company, each call it a Strong Buy. And the average share price target is 134.5p, up 63% from today’s levels.

I’m not surprised by these bullish forecasts. A lot will depend on the state of the British economy and its impact on the housing market. But I think demand for Michelmersh’s bricks will accelerate as more interest rate cuts and an ultra-competitive mortgage sector boost sales of new homes.

Its low valuation should also support a share price recovery. Its forward price-to-earnings growth (PEG) ratio is 0.5, below the bargain watermark of one.

Topps Tiles

Topps Tiles (LSE:TPT) might also enjoy a share price bump as construction markets improve. The four City brokers who rate the company are confident, drawing up an average 12-month target of 70.6p per share.

That’s up 65% from today’ levels. Three of those four analysts consider the retailer a Strong Buy, with the other ranking it a Hold.

As with Michelmersh, Topps could underperform depending on economic conditions. On top of this, it has significant competitive pressures to overcome. However, work to improve its digital channels and product ranges puts it in great shape to exploit a market recovery.

The penny stock also looks dirt cheap at today’s prices. Its forward PEG ratio is 0.4.

Iomart

Catching a so-called falling knife is a notoriously risky business. But Iomart (LSE:IOM) — whose share price is down 77% over the last year — could be an attractive dip buy for more adventurous investors to consider.

Four brokers currently have ratings on the cloud computing specialist. Two consider it a Strong Buy, with two giving it a Hold rating. But the average price target is far more promising. At 48.8p, this is up 192% from current levels.

So what might spark a strong share price rebound? Over the past year, Iomart has suffered from high customer churn and increased borrowing costs. However, November’s financials showed some green shoots of recovery, with customer renewal rates up in the six months to September and order bookings at record highs.

Like Michelmersh and Topps Tiles, I think there’s a good chance this penny share bounces back in 2026.

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Today, I’m on the lookout for the best penny shares to buy. And I’ve come across three that City analysts expect to surge in value over the next 12 months.

Here’s why they’re worth serious consideration right now.

Watkin Jones

Watkin Jones (LSE:WJG) is a construction company specialising in build-to-rent homes, affordable housing, and student accommodation. Given the enormous (and growing) shortages in these property segments, the pricing outlook for the company remains highly favourable.

That’s not to say things are totally comfortable right now. Weakness in the UK economy and higher-than-usual interest rates have impacted trading recently. However, the likelihood of sustained rate cuts means sales volumes are tipped to pick up.

Watkin Jones has a strong balance sheet and a decent pipeline to capture these market improvements, too. It had net cash of £80m as of September.

The consensus among City analysts is the builder’s share price will almost double from current levels over the next 12 months, to 55.8p per share.

Premier Miton

Asset manager Premier Miton (LSE:PMI) is also vulnerable in this era of higher interest rates. It’s also a tiny player compared to some of the industry’s other firms, with less financial and brand clout.

Yet, like Watkin Jones, average share price forecasts for the next year are highly encouraging. A 33% rise to 74.2p per share is currently predicted, supported by expected interest rate reductions.

Premier Miton is embarking on widescale cost-cutting to support earnings and offset current market weakness, too. Last month it announced plans for £2m more worth of savings. It’s already achieved roughly £3m worth.

I think this penny stock could thrive over the long term as demographic changes drive investment services demand.

Michelmersh Brick

Michelmersh Brick (LSE:MBH) is highly exposed to interest rate changes and their effect on the housing market. Yet, the broad resilience of homes demand — and the possibility of a pick up when the Bank of England cuts rates — suggests things could be looking up for the building materials supplier.

City analysts broadly agree its share price should surge over the next year. A 59% rise, to 136.5p per share, is predicted. This would clearly take the company firmly out of penny share territory.

The UK’s growing population means a new housebuilding boom looks about to kick off. The government is planning 300,000 new homes each year until 2029.

Michelmersh has financial scope to raise capacity and make acquisitions to better seize this opportunity.

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That means they may not be such a cheap deal come next year. But as always with income shares, the true test is in the sustainability.

Do they have what it takes to keep paying dividends in the long run? Let’s have a look.

Nexteq

Nexteq (LSE: NXQ) currently boasts a decent 4.7% yield with a payout ratio near 24%, indicating a sustainable dividend policy that’s well-covered by earnings. The price is down 20% in the past five years but has recovered 17% in just the past year alone.

The Cambridge-based technology solutions company reported a 7.8% slump in profits in its latest results, due to challenging market conditions. But CEO Duncan Faithfull lived up to his name, voicing confidence in the company’s long-term prospects due to high customer retention, ongoing innovation, and expansion into high-growth segments like gaming electronics.

Despite the recent revenue declines, the share price is up 36% this year. This growth is backed by a strong cash position and a low debt-to-equity ratio — both factors that help support dividend sustainability.

However, the earnings dip means the current price looks a bit overvalued. That would be my only concern, as it risks a mild price correction in the short term. Still, as far as cheap income stocks go, I think it’s worth considering.

Michelmersh Brick Holdings

Michelmersh Brick Holdings (LSE: MBH) is often viewed as a relatively defensive stock, focused on steady dividend payments and long-term sustainability. The brick manufacturer’s recent interim dividend of 1.6p is equal to last year’s, reflecting confidence in its cash flow despite some profit pressures.

Its payout ratio’s a bit high, at 80%, meaning it only retains 20% of profits to fund operations. But with an 11-year track record of uninterrupted payments, it certainly seems dedicated to rewarding shareholders. Encouragingly, cash coverage is excellent and it looks undervalued, with a forward price-to-earnings (P/E) ratio of only 10.9.

The company maintains a disciplined capital allocation strategy, balancing dividends and share buybacks while investing in well-equipped manufacturing sites to support future growth. It has a strong balance sheet with zero debt and good liquidity, enhancing dividend sustainability even in market downturns.

Still, there’s always the risk that fluctuating energy costs drag down margins, pressuring profits. Plus, the UK construction sector is inherently volatile, which could limit growth.

But overall, it’s one of the more stable dividend-paying penny shares on the market, so one worth considering, in my book.

Balancing risk

Penny stocks are seldom seen as a safe investment but those that pay sustainable dividends add an element of reliability. Even if prices dip in the short term, the dividends shore up the investment until markets improve. And when the prices are as low as these two, it makes for a very tempting offer.

It’s not every day that reliable, high-yielding penny stocks come along. So I think there may be a very real, untapped opportunity here. But as always, investors should only consider them as part of a well-balanced and diversified portfolio.

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However, the selling might have gone too far, at least according to the four City analysts following the stock. They have an average share price target of 136p — some 54% above the current 88p. What’s more, all four rate the stock as a Strong Buy.

Challenging backdrop

Michelmersh is a premium brick and building products manufacturer, operating throughout the UK and Belgium. It sells over 100 products into diverse end markets, including repair, maintenance and improvement (RMI), housing, commercial, urban regeneration, and specification. With around 480 acres of land, it has ample clay reserves.

As the chart shows, the share price has been on a disappointing trajectory since 2021. This is directly related to a drop in UK construction, which has been hit by higher interest rates, cost inflation, and weaker demand.

In 2024, UK brick consumption was around 1.7bn units, down from 2.5bn in 2022. And market despatch volumes today are still 25% below 2022 levels. 

Unsurprisingly then, Michelmersh’s business has been under pressure. In H1, gross margin weakened to 33.6% from 36.2%, partly as a result of an extended shutdown at one of its UK manufacturing facilities. Adjusted EBITDA fell 18% to £5.9m, despite revenue rising 1.1% to £35.8m.

Management warns that the near-term outlook remains murky in both the UK and Belgium. In fact, the company’s Belgium operation was temporarily shut down in Q3 owing to weak demand.

Valuation and yield

However, the good news is that the market has stabilised, while Michelmersh plans to reopen the Belgium plant in Q4. As such, it sees 2025 broadly matching last year’s £71m in revenue.

Next year, management expects a return to growth. This is backed up by current forecasts for £76m in revenue and a 17% increase in net profit (around £8.5m).

Based on this, the penny share is trading at just under 10 times forecast earnings. As mentioned, it’s also offering a 5.3% dividend yield, with the prospective payout well supported by expected earnings.

In September, the interim dividend was maintained, indicating confidence in the outlook for the business. And though the brickmaker has dropped a commitment to a progressive dividend, it did this to have the flexibility to also carry out share buybacks. In April, it authorised up to £2m to repurchase its own stock.

Supportive trends

Make no mistake, the backdrop for brickmakers remains challenging right now. But the medium to long term looks far brighter, with more than 1m new homes set to be built in the UK over the next few years. Belgium has also acknowledged a need to build many more homes.

Looking ahead, the government has committed to reducing red tape around planning approvals, while new English towns have been proposed. Other factors like high immigration, the rise of single dwellers, and an ageing population all point to the need for more houses.

Management says the business is well positioned to take advantage of any recovery in construction activity. With the stock languishing near a 52-week low, and offering a 5.3% dividend yield, investors might want to take a closer look.

The post Down 43%, this penny share is sporting a 5.3% dividend yield appeared first on The Motley Fool UK.

Challenging times

Michelmersh owns a wide portfolio of bricks brands, including most of the UK’s premium ones. It produces over 120m clay bricks and pavers every year. 

As one can imagine, the company is operating in a tough market. On 2 September, we saw this in its half-year results.

While revenue edged 1.1% higher to £35.8m, gross margins narrowed to 33.6% from 36.2%, and adjusted earnings per share (EPS) fell 23% to 3.3p per share. These obviously aren’t great numbers.

Chair Tony Morris commented: “The timing uncertainty in the recovery of the wider UK construction industry and Belgium brick markets continues to challenge the Group. UK brick despatches remain circa 25% below the peak in 2022, whilst Belgium is some 40% below over the same period.” 

Bright spots

It wasn’t all doom and gloom, however. UK despatch volumes outperformed the wider market, including a 3% increase from the start of the period. This was despite the impact of a two-week shutdown in January at its Carlton site.

Meanwhile, the interim dividend was held steady at 1.6p per share, underlining the board’s “confidence in the outlook of the business”. The forecast dividend yield is currently 5%.

Michelmersh now expects FY25 results to be broadly in line with FY24, with trading momentum improving into H2. So the business is displaying some resilience.

Looking further ahead, the firm anticipates a return to growth in 2026. And it has net cash of £1.5m — and a £20m borrowing facility, if needed — to help it get to that point.

The medium term remains brighter

Of course, the challenges haven’t gone away just yet. High inflation and interest rates continue to blight the UK construction industry, creating tough times for brickmakers like Michelmersh. This backdrop adds risk.

If this year’s earnings come in slightly below last year’s, that puts the stock on a price-to-earnings multiple of around 14. But if the firm’s growth resumes next year and beyond, I think the stock could end up good value.

That’s because over the medium to long term, the growth story still looks intact to me. There’s a critical shortage of new residential and social housing, while there will be ongoing repair and maintenance needed for existing brick façades. And there’s still demand from the replacement of unsafe cladding.

Big price discrepancy

Two brokers are also bullish. On 2 September, both Canaccord Genuity and Berenberg Bank reiterated their Buy ratings on the stock and gave it a 150p price target. This was only slightly lower than their old targets of 160p and 170p, respectively.

While broker targets can end up way off the mark, and should be taken with a degree of scepticism, it’s worth noting that Michelmersh is currently trading 58% beneath this new target.

According to Berenberg, Michelmersh’s profits should grow faster than sales, once demand for bricks picks up. Add in the 5% dividend yield on offer, and this penny stock could be set up to generate attractive future returns.

As such, I reckon it’s a buying opportunity for long-term investors to think about.

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Why might investors steer clear of this one? Well, interest rates are still high. And global trade friction could push inflation and keep rates up for longer. And that all puts pressure on building demand.

But against that, forecasts that put the price-to-earnings (P/E) ratio down around 10 by 2027 make it look undervalued to me. Net cash rather than net debt strengthens that feeling. And a forecast 4.4% dividend yield puts a cherry on top.

Even with the sector risk, it has to be a consideration for long-term value investors.

Investment Trust

CT UK High Income (LSE: CHI) investment trust is another favourite that’s just above the usual penny share limits. But it’s not too far out with a £119m market-cap. And a share price rise of around 35% in the past five years has pushed it to only a few pennies over a pound.

What does it have that I like? It has Shell, AstraZeneca, NatWest, Legal & General, Imperial Brands… that’s what. They’re all in its top 10 holdings, together with some other FTSE 100 dividend big-hitters.

They contribute to an expected dividend yield of 5.4%. And dividends are paid quarterly, which could make it a more attractive proposition for investors wanting steady income.

Being such a small-cap trust it must be at greater risk of investors pulling out during downturns and sending the price down. And going for something like the much bigger City of London Investment Trust might be a safer alternative. But the diversification should help offset the risk. And I do like that dividend.

Jam tomorrow

Am I pushing things a bit with a share price up around 130p? That’s where specialist medical diagnosis firm Diaceutics (LSE: DXRX) is, and its market-cap’s just about £112m. But that’s due to a 50% rise since early 2024, so it’s close to being a penny stock time-wise. And forecasts mean I really can’t ignore it.

The company’s loss-making right now after a decline following the Covid days. But forecasts suggest profit in the 2025 fiscal year, with a rise in 2026 giving a P/E of under 18.

It’s also in a niche market. And we never know when a big pharma company might muscle in on its business.

But analysts are bullish on the stock with a strong Buy consensus. And their price targets range from 180p to 225p. Even the lower end is around 35% above the current price.

It’s a tiny, high-risk, currently unprofitable, jam-tomorrow growth stock. But the jam might actually not be very far way.

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