Investing in penny stocks is often seen as a high-risk, high-reward gamble. Yet, occasionally, a hidden gem emerges, offering shareholders extraordinary returns. Even after these companies transition from penny stocks to established small-caps, significant growth potential often remains. This brings us to Concurrent Technologies (LSE:CNC), a company that has caught my attention.
In 2021, Concurrent underwent a strategic and leadership pivot, transforming from a modest computer boards business into a defence hardware specialist. This transition was not seamless, but by early 2024, the company reached a critical inflection point, leading to a near tripling of its share price. With defence spending on the rise, this performance might just be the beginning.
The Bull Case
Concurrent’s strategic shift was designed to capitalise on a significant regulatory change: the Sensor Open Systems Architecture (SOSA) mandate. Traditionally, defence contractors designed proprietary IT systems to lock customers into their ecosystems, creating substantial pricing power. However, this approach led to significant challenges for the military, such as high costs and technological drag due to unsupported components.
SOSA addresses these issues by mandating open, compatible systems, reducing costs and enabling defence technology to keep pace with innovation. Concurrent now specialises in these open systems, avoiding the technical debt of legacy solutions that plague many leading defence contractors. This positioning has allowed Concurrent to secure new orders and outmanoeuvre competitors, resulting in record revenues, profits, and order intake. With NATO rearmament providing additional tailwinds, the company is poised for continued success in the coming years.
Challenges and Risks
While Concurrent’s decision to focus on defence appears prudent, significant execution risks remain. The company is expanding its production capacity at its UK manufacturing site to keep up with its growing order book. However, delays in planning permission have slowed this process. In December, management announced another delay in the facility expansion. To mitigate this, Concurrent proposed moving office workers to a new building and reconfiguring existing space for manufacturing, a plan expected to be executed by the first half of 2026. Any further delays could disrupt order fulfilment, potentially slowing the company’s momentum and impacting its share price.
The Bottom Line
Concurrent Technologies is evolving into a serious contender in the defence sector, with vast market opportunities ahead. While investing in the defence sector may not be suitable for everyone, Concurrent represents a compelling opportunity worth considering. As we look ahead to 2026, Concurrent is one of the small-cap opportunities that stands out, making it a business worth watching closely.
Obviously, not everyone may be comfortable with investing in the defence sector. But luckily, Concurrent isn’t the only small-cap opportunity I’ve spotted in 2026.