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. That said, here is one small-cap stock that could be the next 100 bagger and two that could be down big.
Two Small-Cap Stocks to Sell:
Bumble (BMBL)
Market Cap: $446.5 million
Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ:BMBL) is a leading dating app built with women at the center.
Why Does BMBL Worry Us?
- Decision to emphasize platform growth over monetization has contributed to 3.9% annual declines in its average revenue per buyer
- Estimated sales decline of 8.5% for the next 12 months implies a challenging demand environment
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 3.6% annually
Bumble is trading at $4.14 per share, or 1.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BMBL.
Caleres (CAL)
Market Cap: $521.7 million
The owner of Dr. Scholl's, Caleres (NYSE:CAL) is a footwear company offering a range of styles.
Why Should You Sell CAL?
- Products and services have few die-hard fans as sales have declined by 1.4% annually over the last five years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Underwhelming 2.4% return on capital reflects management’s difficulties in finding profitable growth opportunities
Caleres’s stock price of $14.39 implies a valuation ratio of 5x forward price-to-earnings. Read our free research report to see why you should think twice about including CAL in your portfolio.
One Small-Cap Stock to Watch:
H&R Block (HRB)
Market Cap: $7.62 billion
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE:HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Why Are We Positive On HRB?
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 21.4%
- Industry-leading 49% return on capital demonstrates management’s skill in finding high-return investments, and its rising returns show it’s making even more lucrative bets
- Returns on capital are growing as management capitalizes on its market opportunities
At $56.10 per share, H&R Block trades at 5.4x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.