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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.
One Small-Cap Stock to Sell:
Cogent (CCOI)
Market Cap: $969.9 million
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Is CCOI Risky?
- Sales trends were unexciting over the last two years as its 1.8% annual growth was below the typical business services company
- Eroding returns on capital suggest its historical profit centers are aging
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Cogent’s stock price of $20.32 implies a valuation ratio of 9.9x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CCOI.
Two Small-Cap Stocks to Watch:
Astronics (ATRO)
Market Cap: $2.59 billion
Integrating power outlets into many Boeing aircraft, Astronics (NASDAQ: ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries.
Why Should You Buy ATRO?
- Annual revenue growth of 11.8% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin grew by 7.6 percentage points over the last five years, giving the company more chips to play with
- Improving returns on capital suggest its past investments are beginning to deliver value
At $72.40 per share, Astronics trades at 28x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Magnolia Oil & Gas (MGY)
Market Cap: $5.55 billion
Operating over 600,000 net acres primarily in two distinct South Texas regions, Magnolia Oil & Gas (NYSE: MGY) drills and produces oil, natural gas, and natural gas liquids from South Texas formations.
Why Does MGY Stand Out?
- Market share has increased this cycle as its 19.7% annual revenue growth over the last five years was exceptional
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 84.8%
- Robust free cash flow margin of 40.1% gives it many options for capital deployment
Magnolia Oil & Gas is trading at $30.06 per share, or 10.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
