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.
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. That said, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Mission Produce (AVO)
Market Cap: $873.5 million
Founded in 1983 in California, Mission Produce (NASDAQ: AVO) grows, packages, and distributes avocados.
Why Do We Think AVO Will Underperform?
- Revenue base of $1.34 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Projected sales decline of 17% for the next 12 months points to a tough demand environment ahead
- Gross margin of 12% is an output of its commoditized products
Mission Produce is trading at $12.47 per share, or 19.5x forward P/E. To fully understand why you should be careful with AVO, check out our full research report (it’s free).
Lemonade (LMND)
Market Cap: $4.41 billion
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Why Does LMND Fall Short?
- Annual earnings per share growth of 17% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 18.4% annually over the last five years
- Negative return on equity shows that some of its growth strategies have backfired
Lemonade’s stock price of $57.06 implies a valuation ratio of 8.6x forward P/B. If you’re considering LMND for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
BioMarin Pharmaceutical (BMRN)
Market Cap: $9.70 billion
Pioneering treatments for conditions that often had no previous therapeutic options, BioMarin Pharmaceutical (NASDAQ: BMRN) develops and commercializes therapies that address the root causes of rare genetic disorders, particularly those affecting children.
Why Are We Positive On BMRN?
- 14.5% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Projected revenue growth of 26.5% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Free cash flow margin expanded by 5.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $52.03 per share, BioMarin Pharmaceutical trades at 2.4x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
