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While some growth stocks outperformed in 2025, others faltered. And Judges Scientific (LSE:JDG) has seen its share price fall 34% in the last 12 months.
The last year has been a tough one, but the equation looks very different as we move into 2026. In fact, I think this could be one of the UK’s top growth stocks in the year ahead.
2025 challenges
At the start of 2025, Judges Scientific shares were trading at a price-to-earnings (P/E) ratio of 24. That reflected some high investor expectations for future growth.
This however, didn’t materialise. A key part of the market for scientific instruments is US universities and the government’s decision to reduce research spending stunted expectations.
Sales in the US – a key market – fell 20% as a result and the impact on profits was even greater. But the stock wasn’t priced for this kind of decline, which is why it fell.
Overall revenues actually climbed, but this was due to the timing of a coring expedition from one of the firm’s subsidiaries. That however, won’t be repeated in 2026.
The big challenge that investors are – rightly – focusing on is the weak demand in the US. But I think there are reasons for optimism heading into the new year.
2026 outlook
The first and most obvious thing to note is that the stock currently trades at some much lower valuation multiples. The forward P/E ratio’s now a much less demanding 15. That means there probably isn’t the same scope for multiple compression going forward. But the case for Judges Scientific shares in 2026 isn’t just about a lower valuation.
Universities in the US should be about to get some clarity over their budgets in the near future. Congress is due to decide on the proposed cuts at the end of January. Even if the cuts pass, greater clarity could help a lot. Labs that have been dealing with uncertainty about budgets should be able to start making spending decisions again.
It will take a while for the effects of this to show up in Judges Scientific’s earnings. And there’s a risk that the consolidation of institutes could delay things further. This potential restructuring is a Department of Government Efficiency Initiative and a final decision isn’t due until July. But some positive signs could be on the way in January.
Is this the year?
Judges Scientific has been dealing with some major spending cuts weighing on demand. But there are positive signs that greater clarity could bring a recovery in 2026.
Investors probably won’t have long to wait. But even if the news in January isn’t positive, I think the firm’s competitive position means it’s only a matter of time.
In the context of my own portfolio, I’m prepared to be patient. I already own the stock, but the lower valuation means I’m considering adding to my investment.
This story originally appeared on Motley Fool
