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. Keeping that in mind, here is one small-cap stock that could amplify your portfolio’s returns and two that may have trouble.
Two Small-Cap Stocks to Sell:
Sunrun (RUN)
Market Cap: $3.70 billion
Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ: RUN) provides residential solar electricity, specializing in panel installation and leasing services.
Why Do We Think Twice About RUN?
- Sales tumbled by 6.2% annually over the last two years, showing market trends are working against its favor during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $16.11 per share, Sunrun trades at 22.3x forward EV-to-EBITDA. To fully understand why you should be careful with RUN, check out our full research report (it’s free).
Renasant (RNST)
Market Cap: $3.52 billion
Founded in 1904 during a time when the South was rebuilding its economy, Renasant (NYSE: RNST) is a regional bank holding company that offers banking, wealth management, insurance, and specialized lending services throughout the Southeast.
Why Are We Wary of RNST?
- Inferior net interest margin of 3.4% means it must compensate for lower profitability through increased loan originations
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 8.6% annually while its revenue grew
- Capital trends were unexciting over the last two years as its 4.2% annual tangible book value per share growth was below the typical banking firm
Renasant is trading at $37.05 per share, or 0.9x forward P/B. Check out our free in-depth research report to learn more about why RNST doesn’t pass our bar.
One Small-Cap Stock to Watch:
Vita Coco (COCO)
Market Cap: $2.29 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
Why Is COCO on Our Radar?
- Products are seeing elevated demand as its unit sales averaged 7.8% growth over the past two years
- Earnings per share have massively outperformed its peers over the last three years, increasing by 195% annually
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
Vita Coco’s stock price of $38.23 implies a valuation ratio of 31.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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 Exlservice (+354% 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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