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.
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 big thing and two that could be down big.
Two Small-Cap Stocks to Sell:
Commerce (CMRC)
Market Cap: $354.3 million
As a founding member of the MACH Alliance advocating for modern tech standards, Commerce (NASDAQ: CMRC) provides a SaaS platform that enables businesses to build and manage online stores, connect with marketplaces, and integrate with point-of-sale systems.
Why Do We Pass on CMRC?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 2.4% underwhelmed
- Estimated sales growth of 4.1% for the next 12 months implies demand will slow from its two-year trend
- Low free cash flow margin of 8.3% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Commerce’s stock price of $4.37 implies a valuation ratio of 1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than CMRC.
Ladder Capital (LADR)
Market Cap: $1.33 billion
Founded during the 2008 financial crisis when traditional lenders retreated from commercial real estate, Ladder Capital (NYSE: LADR) is a real estate investment trust that originates commercial real estate loans, owns commercial properties, and invests in real estate securities.
Why Do We Think Twice About LADR?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 15.4% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Flat tangible book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
Ladder Capital is trading at $10.49 per share, or 0.9x forward P/B. If you’re considering LADR for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
Abercrombie and Fitch (ANF)
Market Cap: $3.19 billion
Founded as an outdoor and sporting brand, Abercrombie & Fitch (NYSE: ANF) evolved to become a specialty retailer that sells its own brand of fashionable clothing to young adults.
Why Could ANF Be a Winner?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 13.5% over the past two years
- Collection of products is difficult to replicate at scale and results in a best-in-class gross margin of 63.6%
- Earnings per share have massively outperformed its peers over the last six years, increasing by 48.1% annually
At $67.96 per share, Abercrombie and Fitch trades at 7x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-micro-cap company Tecnoglass (+1,754% 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
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