Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
UniFirst (UNF)
Market Cap: $3.76 billion
With a fleet of trucks making weekly deliveries to over 300,000 customer locations, UniFirst (NYSE: UNF) provides, rents, cleans, and maintains workplace uniforms and protective clothing for businesses across various industries.
Why Are We Hesitant About UNF?
- Muted 3.5% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Projected sales growth of 2.5% for the next 12 months suggests sluggish demand
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.1% annually
UniFirst’s stock price of $208.10 implies a valuation ratio of 29.6x forward P/E. To fully understand why you should be careful with UNF, check out our full research report (it’s free).
KB Home (KBH)
Market Cap: $3.64 billion
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Pass on KBH?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 21.6% declines over the past two years
- Earnings per share have dipped by 4.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $57.40 per share, KB Home trades at 13.6x forward P/E. Check out our free in-depth research report to learn more about why KBH doesn’t pass our bar.
One Small-Cap Stock to Buy:
American Superconductor (AMSC)
Market Cap: $1.36 billion
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Will AMSC Beat the Market?
- Annual revenue growth of 49% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow turned positive over the last five years, indicating the company has passed a significant test
- Rising returns on capital show the company is starting to reap the benefits of its past investments
American Superconductor is trading at $30.35 per share, or 34.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
