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. Keeping that in mind, here is one small-cap stock that could be the next big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Nextdoor (KIND)
Market Cap: $616 million
Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE: KIND) is a social network that connects neighbors with each other and with local businesses.
Why Does KIND Fall Short?
- Choice to prioritize new users over monetization has resulted in weak growth in its average revenue per user
- Historical EBITDA margin losses point to an inefficient cost structure
- Cash-burning history makes us doubt the long-term viability of its business model
At $1.60 per share, Nextdoor trades at 3x forward price-to-gross profit. To fully understand why you should be careful with KIND, check out our full research report (it’s free).
GoPro (GPRO)
Market Cap: $124.1 million
Known for sponsoring extreme athletes, GoPro (NASDAQ: GPRO) is a camera company known for its POV videos and editing software.
Why Do We Pass on GPRO?
- Annual revenue declines of 5.4% over the last five years indicate problems with its market positioning
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
GoPro is trading at $0.80 per share, or 12.1x forward P/E. Dive into our free research report to see why there are better opportunities than GPRO.
One Small-Cap Stock to Buy:
Nova (NVMI)
Market Cap: $8.30 billion
Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Why Are We Bullish on NVMI?
- Market share has increased this cycle as its 14.3% annual revenue growth over the last two years was exceptional
- Robust free cash flow margin of 28.6% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
- ROIC punches in at 31.2%, illustrating management’s expertise in identifying profitable investments
Nova’s stock price of $285.01 implies a valuation ratio of 34.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum 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-small-cap company Exlservice (+354% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
