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 could be down big.
Two Small-Cap Stocks to Sell:
Paylocity (PCTY)
Market Cap: $6.05 billion
Operating in a field where companies traditionally juggled multiple disconnected systems, Paylocity (NASDAQ: PCTY) provides cloud-based human capital management and payroll software solutions that help businesses manage their workforce and HR processes.
Why Does PCTY Worry Us?
- ARR growth averaged a weak 12.6% over the last year, suggesting that competition is pulling some attention away from its software
- Estimated sales growth of 7.6% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 1.9 percentage points over the last year as it scaled and became more efficient
At $112.96 per share, Paylocity trades at 3.1x forward price-to-sales. To fully understand why you should be careful with PCTY, check out our full research report (it’s free).
Simmons First National (SFNC)
Market Cap: $3.04 billion
With roots dating back to 1903 and a presence across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, Simmons First National (NASDAQ: SFNC) is a regional bank holding company that provides banking and financial services to individuals and businesses.
Why Is SFNC Risky?
- Net interest income trends were unexciting over the last five years as its 4% annual growth was below the typical banking firm
- Efficiency ratio is expected to worsen by 17.8 percentage points over the next year
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 4% annually
Simmons First National is trading at $20.93 per share, or 0.8x forward P/B. Check out our free in-depth research report to learn more about why SFNC doesn’t pass our bar.
One Small-Cap Stock to Watch:
Wintrust Financial (WTFC)
Market Cap: $9.91 billion
Founded in 1991 as a community-focused alternative to big banks in the Chicago area, Wintrust Financial (NASDAQGS:WTFC) operates community banks in the Chicago area and provides specialty finance services including insurance premium financing and wealth management.
Why Do We Like WTFC?
- Annual net interest income growth of 17% over the past five years was outstanding, reflecting market share gains this cycle
- Non-interest operating profits increased over the last five years as the firm gained some leverage on its fixed costs and became more efficient
- Balance sheet strength has increased this cycle as its 10.2% annual tangible book value per share growth over the last five years was exceptional
Wintrust Financial’s stock price of $146.88 implies a valuation ratio of 1.3x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
