Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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. Keeping that in mind, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Herc (HRI)
Market Cap: $3.25 billion
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.
Why Do We Think Twice About HRI?
- Flat earnings per share over the last two years underperformed the sector average
- Free cash flow margin shrank by 18 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $114.76 per share, Herc trades at 8.8x forward P/E. Read our free research report to see why you should think twice about including HRI in your portfolio.
Columbia Banking System (COLB)
Market Cap: $4.75 billion
Created through the merger of two Pacific Northwest banking institutions with deep regional roots, Columbia Banking System (NASDAQ: COLB) operates Umpqua Bank, providing commercial, consumer, and wealth management services across eight western states.
Why Are We Wary of COLB?
- Estimated net interest income growth of 2.3% for the next 12 months implies demand will slow from its four-year trend
- Annual earnings per share growth of 2.9% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Loan losses and capital returns have eroded its tangible book value this cycle as its tangible book value per share declined by 1.2% annually over the last five years
Columbia Banking System’s stock price of $22.66 implies a valuation ratio of 0.9x forward P/B. If you’re considering COLB for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Globalstar (GSAT)
Market Cap: $2.78 billion
Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ: GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.
Why Are We Positive On GSAT?
- Annual revenue growth of 20.7% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 33.7% outpaced its revenue gains
- Robust free cash flow margin of 27.9% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
Globalstar is trading at $21.86 per share, or 26.8x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out 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
