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Buying undervalued and under-appreciated growth stocks is a great way to try and beat the market. Here’s some on my watchlist for 2026.
TBC Group
Banks are notoriously cyclical and reflect the health of the economies they serve. TBC Group (LSE:TBCG) is particularly interesting because it operates in two of the fastest growing economies in Eurasia.
However, the stock hasn’t performed anywhere near as well as its Georgian peer, Lion Finance. That’s partially because it’s had to shift its Uzbek strategy following regulatory changes, but it’s starting to look rather overlooked now, I think.
It’s forecasted to grow revenue by 17.5% on average over the next two years. That’s the 17th fastest on the FTSE All Share index.
Earnings are expected to grow a little slower, around 11% per year. But this is still exceptional for a stock trading at 5.1 times forward earnings and with a 6% dividend yield — that’s well covered (2.9 times) by earnings.
Concerns centre around the Uzbek business and whether recent regulatory tightening will cap profitability over the medium term.
However, more broadly, the company looks well positioned to benefit from two fast-growing economies, building out its loan book and leveraging strong net interest margins.
Jet2
Jet2 is the cheapest of all the airlines I know, trading around five times net income when adjusted for cash. It’s got an incredibly strong balance sheet with around £800m in net cash.
Earnings growth is largely on hold for now following the government’s business-punishing budgets as well as an expensive expansion plan into Gatwick. It’s also undergoing a fleet overhaul programme.
The forecasts expect this will cost 14% of revenue, suggesting it can be done without negatively impacting the balance sheet.
Looking forward, the impact of investments in the fleet and new operations at Gatwick should become clear in 2026. This includes a £10 cost saving per seat as the Airbus aircraft replace older Boeings.
Risks include a surge in fuel prices — which never should be written off with war still raging in Eastern Europe — and more punitive taxes on working Britons, which could hurt demand for air travel.
What else on is my list?
Sanmina Corporation looks like an attractive proposition with its upcoming takeover of ZT Systems’s manufacturing arm. The company looks set to position itself as a key manufacturing partner for AI infrastructure.
Currently it’s trading around 15 times forward earnings, but the business will change significantly with the $3bn ZT deal. Net debt will move to around $2bn and sales could push up towards $14bn per year. And with a projected medium-term earnings growth rate around 25%, the stock appears to have a 0.6 price-to-earnings-to-growth (PEG) ratio.
However, investors have to accept that the ZT deal could a risk if the AI sector experiences any speed bumps.
Other stocks on my watchlist include Seagate Technology — a provider of data storage technology and infrastructure solutions. It’s up over 200% this year, but as Micron‘s recent results showed, data storage is in high demand and prices are surging.
Another is buy-now-pay-later company Sezzle. It offers strong margins, a strong balance sheet, and impressive earnings growth.
In short, I believe all are worth considering.
