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.
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. Keeping that in mind, here are two small-cap stocks that could be the next 100 baggers and one that could be down big.
One Small-Cap Stock to Sell:
Columbia Sportswear (COLM)
Market Cap: $2.92 billion
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Should You Sell COLM?
- Lackluster 3.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Poor free cash flow margin of 8.5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Columbia Sportswear’s stock price of $57.10 implies a valuation ratio of 14.6x forward P/E. Check out our free in-depth research report to learn more about why COLM doesn’t pass our bar.
Two Small-Cap Stocks to Watch:
Napco (NSSC)
Market Cap: $1.30 billion
Protecting everything from schools to government facilities since 1969, Napco Security Technologies (NASDAQ: NSSC) manufactures electronic security devices, access control systems, and communication services for intrusion and fire alarm systems.
Why Should NSSC Be on Your Watchlist?
- Impressive 12.1% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
- Returns on capital are growing as management capitalizes on its market opportunities
Napco is trading at $36.45 per share, or 22.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
DHT Holdings (DHT)
Market Cap: $3.71 billion
With each vessel capable of carrying roughly 2 million barrels of oil—enough to fill about 125 Olympic swimming pools—DHT Holdings (NYSE: DHT) operates very large crude carriers that transport crude oil across international routes for energy companies and traders.
Why Do We Like DHT?
- Annual revenue growth of 6.4% over the last ten years was superb and indicates its market share increased during this cycle
- EBITDA profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Robust free cash flow margin of 28.8% gives it many options for capital deployment
At $23.35 per share, DHT Holdings trades at 7.6x forward P/E. 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
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
