ASX small-cap shares are underperforming the broader market in 2026.
An ASX small-cap share typically has a market capitalisation of between approximately $300 million and $2 billion.
The S&P/ASX Small Ords Index (ASX: XSO) is down 9.8% versus a 2.3% dip in the S&P/ASX All Ords Index (ASX: XAO) year-to-date.
However, Morgans sees opportunity with these three ASX small-cap shares.
Let’s find out why.
Tasmea Ltd (ASX: TEA)
The Tasmea share price is $8.14, down 1.1% today and up 94% in the calendar year to date (YTD).
Tasmea is a skilled services company that provides essential maintenance, engineering, and specialised project services.
The company operates in many industries including mining, oil and gas, waste and water, power and renewable energy, and defence.
Morgans has a buy rating on this ASX small-cap share in the industrials sector.
In a new note, the broker raised its 12-month share price target substantially from $5.25 to $9.15 following acquisition news.
Morgans said:
TEA has agreed to acquire Victorian specialist electrical contractor Maxim Group for up to $254m (~5.4x FY26F EV/EBIT).
The deal is ~31% EPS accretive, scales TEA’s Electrical segment to >$100m EBIT and diversifies earnings away from resources into data centres, infrastructure and Battery Energy Storage Systems (BESS).
TEA will look to leverage its regional expertise as data centres increasingly move out of metropolitan areas.
Maxim’s owner-led team is retained and aligned via scrip and a three-year earn-out.
We make meaningful EPS changes of +30-34% in each of FY27 and FY28. BUY maintained.
Vysarn Ltd (ASX: VYS)
The Vysarn share price is 94 cents, up 2.4% today and up 28% YTD.
Vysarn provides production-critical services to the resources, construction, and utilities industries.
Morgans upgraded this ASX materials small-cap share after Vysarn announced it was buying an irrigations systems company.
The broker lifted its rating from speculative buy to buy, and raised its target price from 90 cents to $1.10.
The broker said:
VYS is acquiring NewGround, adding highly accretive (~25% EPS) annuity-style earnings that, alongside greater customer-base diversification in the industrial division, materially increases earnings visibility.
The limited upfront cash component of $8.3m preserves balance sheet flexibility, providing further capacity to continue building out its integrated water-services platform via acquisitions.
Incorporating NewGround from early October, we raise our EPS forecasts in FY27 and FY28 by +19 and +24% respectively.
Reflecting the improvement in earnings quality and reduced volatility, we upgrade VYS from Speculative Buy to Buy.
While the Kariyarra asset management business carries a binary outcome, at the current share price, investors are getting this optionality for free.
Tourism Holdings Ltd (ASX: THL)
The Tourism Holdings share price is $2.06, up 1.5% today and down 10% YTD.
Tourism Holdings rents and sells holiday campervans in Australia, New Zealand, and the US.
Morgans has a buy rating on this ASX industrials small-cap share with a $2.58 target.
In a new note, the broker said:
Unsurprisingly, given the conflict in the Middle East, THL has revised its FY26 NPAT guidance given weaker than expected RV sales.
The conflict, higher fuel prices and cost of living pressures push out the earnings recovery despite all of THL’s internal initiatives to improve the business.
Tourism Holdings is also listed on the New Zealand Stock Exchange at NZ$2.47 per share.
Morgans notes that BGH Capital and the Trouchet shareholders have issued a revised takeover offer of NZ$3.10 for the company.
The post 3 ASX small-cap shares to buy: Morgans appeared first on The Motley Fool Australia.
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* Returns as of 20 Feb 2026
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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vysarn. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.