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:

Rush Enterprises (RUSHA)

Market Cap: $5.04 billion

Headquartered in Texas, Rush Enterprises (NASDAQ: RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.

Why Do We Think RUSHA Will Underperform?

1. Sales tumbled by 3.1% annually over the last two years, showing market trends are working against its favor during this cycle
2. Gross margin of 20.3% reflects its high production costs
3. Earnings per share have contracted by 11.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

Rush Enterprises is trading at $66.23 per share, or 18.5x forward P/E. Check out our free in-depth research report to learn more about why RUSHA doesn’t pass our bar.

Kennametal (KMT)

Market Cap: $2.71 billion

Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE: KMT) is a provider of industrial materials and tools for various sectors.

Why Should You Dump KMT?

1. Sales tumbled by 1.1% annually over the last two years, showing market trends are working against its favor during this cycle
2. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
3. Earnings per share lagged its peers over the last two years as they only grew by 1.9% annually

Kennametal’s stock price of $35.57 implies a valuation ratio of 14.2x forward P/E. Read our free research report to see why you should think twice about including KMT in your portfolio.

One Small-Cap Stock to Watch:

Braze (BRZE)

Market Cap: $2.64 billion

With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.

Why Are We Fans of BRZE?

1. Billings have averaged 28% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
2. Projected revenue growth of 20.3% for the next 12 months suggests its momentum from the last two years will persist

At $23.16 per share, Braze trades at 2.6x forward price-to-sales. 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

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