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.
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. That said, 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:
Ruger (RGR)
Market Cap: $750.2 million
Founded in 1949, Ruger (NYSE:RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Do We Avoid RGR?
- Products and services aren't resonating with the market as its revenue declined by 3.9% annually over the last two years
- Earnings per share fell by 14.6% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Ruger’s stock price of $46.42 implies a valuation ratio of 24.4x forward P/E. If you’re considering RGR for your portfolio, see our FREE research report to learn more.
Taboola (TBLA)
Market Cap: $942.9 million
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ:TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Why Does TBLA Worry Us?
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 2% annually
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2,406.2 percentage points
- Push for growth has led to negative returns on capital, signaling value destruction
Taboola is trading at $3.20 per share, or 7.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why TBLA doesn’t pass our bar.
One Small-Cap Stock to Buy:
HCI Group (HCI)
Market Cap: $2.42 billion
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE:HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
Why Will HCI Outperform?
- Net premiums earned surged by 26.7% annually over the past two years, reflecting strong market share gains this cycle
- Balance sheet strength has increased this cycle as its 63.4% annual book value per share growth over the last two years was exceptional
- Notable projected book value per share growth of 23% for the next 12 months hints at strong capital generation
At $186.75 per share, HCI Group trades at 2.9x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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