Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
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 is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Q2 Holdings (QTWO)
Market Cap: $3.04 billion
With a platform powering digital services for approximately 25 million account holders across America, Q2 Holdings (NYSE: QTWO) provides cloud-based digital solutions that help financial institutions, fintechs, and alternative finance companies deliver modern banking experiences to their customers.
Why Does QTWO Fall Short?
- ARR growth averaged a weak 11.2% over the last year, suggesting that competition is pulling some attention away from its software
- Estimated sales growth of 10.2% for the next 12 months implies demand will slow from its two-year trend
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 54.1%, one of the worst among software companies
At $48.73 per share, Q2 Holdings trades at 3.7x forward price-to-sales. Check out our free in-depth research report to learn more about why QTWO doesn’t pass our bar.
Pediatrix Medical Group (MD)
Market Cap: $1.76 billion
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Is MD Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2% annually over the last two years
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Pediatrix Medical Group is trading at $21.69 per share, or 9.5x forward P/E. Read our free research report to see why you should think twice about including MD in your portfolio.
One Small-Cap Stock to Watch:
Concentrix (CNXC)
Market Cap: $1.68 billion
With a team of approximately 450,000 employees across 75 countries, Concentrix (NASDAQ: CNXC) designs and delivers customer experience solutions that help global brands manage their customer interactions across digital channels and contact centers.
Why Do We Like CNXC?
- Annual revenue growth of 15.3% over the last five years was superb and indicates its market share increased during this cycle
- Economies of scale give it some operating leverage when demand rises
Concentrix’s stock price of $27.49 implies a valuation ratio of 2.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
