Freedom24-Lithuania head shares Baltic small-cap stocks and sectors with 2026 upside

The Baltic States – Lithuania, Latvia, and Estonia – are emerging from an economic downturn. According to the European Commission forecasts, the region is now entering a phase of moderate growth, with the key driver being a recovery in domestic demand. Against this backdrop, Baltic companies, whose shares are illiquid but which are stable in terms of fundamentals, can offer a risk premium in a segment that remains off large investors' radar and lacks broad analytical coverage. Marius Varneckas, head of Freedom24 in Lithuania, argues that this is creating attractive entry points for investors in 2026.

Lithuania's economy – the largest in the region – is expected to grow 2.7% in 2025 and 3.0% in 2026, according to the European Commission. Latvia, after stagnating in 2024, is projected to pick up momentum: GDP is forecast to expand to 1.7% in 2026 after about 1.0% in 2025. Estonia, which has experienced the longest slowdown in the region, is also beginning to turn things around: the European Commission expects GDP growth of around 2.1% in 2026.

The recovery of the Baltic economies is being driven by rising household incomes and consumer activity, a revival in investment, and an expansion in exports. In Estonia, additional support is coming from improving conditions in Scandinavia, the country's key trade destination. A common factor across the region is rapid disinflation: after double-digit inflation readings in 2022, price growth is expected to move toward the 2-3% range in 2026-2027. That should entail a recovery in real household income growth. Historically, such dynamics have been among the main drivers of earnings expansion for small caps, particularly in retail, industrial equipment, and niche consumer categories.

Below, Varneckas of Freedom24 looks out four small-cap stocks from the Baltic region with upside on a horizon of 6-18 months.

Latvian telecom equipment manufacturer SAF Tehnika (SAF1R) is one of the few independent European producers of microwave equipment for wireless data transmission. The company operates in a niche segment supplying telecom operators, government agencies, and private networks. This is a technologically complex market that requires continuous investment in development, a strong engineering base, and advanced equipment.

In recent years, the company has faced a cyclical industry downturn in demand, which has seen its quotes roughly halve to EUR6.60 per share – down from previous peaks of around EUR13-14 per share. Nevertheless, recent financial updates suggest demand is beginning to turn, with SAF's revenue rising 50% year over year to EUR23.35 million in the first half of fiscal 2025/2026 and net profit climbing more than threefold to EUR3.43 million. The geographic mix also points to improving demand, with sales in Europe up more than 150% and the Asia, Africa, and Middle East regions rising by more than 200%.

Since the beginning of calendar 2026, the company's shares have risen by about 45%. At SAF Tehnika's current P/E ratio of about 16.6, the market is effectively pricing in continued stable growth. From a technical perspective, the nearest level of possible selling pressure is in a range of EUR14-15 per share, which corresponds to upside of about 45% from current levels.* The main contributor to the upside is rebounding investments by telecom operators, while the main risks in the stock are cyclicality of orders and low liquidity.

Harju Elekter (HAE1T) is an Estonian manufacturer of electrical distribution equipment and solutions for energy and industry. Its main markets are Finland and Sweden, countries with elevated infrastructure investment. The company stands to benefit directly from power-grid modernization: the expansion of data centers, electric vehicles, and distributed generation necessitates an upgrade of electrical systems.

In the third quarter of 2025, Harju Elekter's revenue increased 4.5% year over year to EUR43 million, while net profit rose 70% to EUR2.90 million. The stock trades at a P/E ratio of 9.6, whereas European electrical equipment manufacturers are typically valued at around 14-18, suggesting the market is not yet pricing in sustained earnings growth for Harju Elekter.

Harju Elekter shares have gained almost 18% year to date. The nearest technical level is around EUR6.70 per share, which corresponds to upside of about 18%.* Growth drivers include EU investment in energy infrastructure, while the main risks are delays to large projects and fluctuations in raw material costs.

Madara (MDARA), a Latvian manufacturer of natural cosmetics, entered the market ahead of the natural trend. The company maintains in-house R&D capabilities, produces certified products (Ecocert, COSMOS), and emphasizes bioingredients. Madara products are exported to more than 35 countries – a high level of international exposure for a small business.

In the first half of 2025, revenue rose 9% year over year to around EUR11.37 million, with pretax profit of EUR284k versus EUR4.6 million in the same period last year.

More important in this case is not the P/E ratio (around 23.8), but rather the P/S ratio, which is now around 1.8, a moderate level for an export-oriented consumer brand. Madara shares are up 14.5% year to date. The next technical level is around EUR14 per share, which implies upside of about 19%.* The main driver is the rise of the natural cosmetics segment, while risks include competition and marketing costs.

Apranga Group (APG1L) is the largest fashion retailer in the Baltics, operating franchises of Zara, Mango, and Bershka, among other international brands. It operates more than 160 stores in the region.

Apranga's retail turnover increased 5.7% year over year to EUR265.8 million in the third quarter of 2025, with improvements in online channels and logistics supporting inventory turnover and cash flow.

The stock trades at a P/E ratio of around 13.2, while European retailers are valued in the 18-25 P/E range. The market continues to treat Apranga as a stagnant story despite recovering consumption.

Since the beginning of the year, Apranga shares have risen about 7%. The next technical level for the company's shares is EUR5 per share, which implies upside of about 36%.* The main growth driver is rising real household incomes, while potential risks include seasonality and sensitivity to consumption dynamics.

Baltic small caps are a market characterized by low liquidity and wide spreads. Even strong earnings are not always immediately reflected in prices: quotes can remain flat for weeks and then move abruptly – for example, when a large buyer or seller emerges. As a result, there stocks require a longer investment horizon and a cautious approach to position sizing.

The investment case of Baltic small caps is not about short-term momentum. The idea is enter at the right stage of the cycle. The region's economy is gradually recovering, company financials are improving, and valuations still largely reflect the weakness of previous years. As new earnings are released and investor interest returns, the market typically reprices gradually. Looking toward 2026, upside for the sector generally depends on this repricing: the moment when small caps will cease to be perceived as purely local players and begin to be valued as sustainable regional businesses.

* Many companies that trade on the Nasdaq Baltic do not have analyst coverage, so technical-based price levels are used, specifically historical trading ranges with multiples returning to normal levels.