Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here is one small-cap stock that could be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
Ollie's (OLLI)
Market Cap: $5.06 billion
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Why Does OLLI Worry Us?
- Modest revenue base of $2.73 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Static operating margin over the last year shows it couldn’t become more efficient
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $80.83 per share, Ollie's trades at 18.1x forward P/E. Read our free research report to see why you should think twice about including OLLI in your portfolio.
Avis Budget Group (CAR)
Market Cap: $6.70 billion
The parent company of brands such as Zipcar and Budget Truck Rental, Avis (NASDAQ: CAR) is a provider of car rental and mobility solutions.
Why Does CAR Give Us Pause?
- Annual sales declines of 1% for the past two years show its products and services struggled to connect with the market during this cycle
- Diminishing returns on capital suggest its earlier profit pools are drying up
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Avis Budget Group’s stock price of $188.25 implies a valuation ratio of 0.6x forward price-to-sales. If you’re considering CAR for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Buy:
QuinStreet (QNST)
Market Cap: $700.3 million
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ: QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Is QNST a Good Business?
- Impressive 47.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 628% over the last two years outstripped its revenue performance
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
QuinStreet is trading at $12.15 per share, or 8.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
