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 may have trouble.
Two Small-Cap Stocks to Sell:
Wynn Resorts (WYNN)
Market Cap: $8.72 billion
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Does WYNN Worry Us?
- Muted 3.3% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- ROIC of 1.9% reflects management’s challenges in identifying attractive investment opportunities
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $84.30 per share, Wynn Resorts trades at 17.1x forward P/E. If you’re considering WYNN for your portfolio, see our FREE research report to learn more.
Travel + Leisure (TNL)
Market Cap: $3.17 billion
Formerly known as Wyndham Destinations, Travel + Leisure (NYSE: TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services.
Why Do We Steer Clear of TNL?
- Sluggish trends in its tours conducted suggest customers aren’t adopting its solutions as quickly as the company hoped
- Projected sales growth of 2.8% for the next 12 months suggests sluggish demand
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Travel + Leisure’s stock price of $47.79 implies a valuation ratio of 7.2x forward P/E. Check out our free in-depth research report to learn more about why TNL doesn’t pass our bar.
One Small-Cap Stock to Watch:
e.l.f. Beauty (ELF)
Market Cap: $7.06 billion
Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.
Why Does ELF Catch Our Eye?
- Remarkable 49.6% revenue growth over the last three years demonstrates its ability to capture significant market share
- Differentiated product offerings are difficult to replicate at scale and result in a best-in-class gross margin of 71%
- Earnings per share grew by 58.6% annually over the last three years and trumped its peers
e.l.f. Beauty is trading at $125.39 per share, or 34.9x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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 Comfort Systems (+782% 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
