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 is one small-cap stock that could be the next big thing and two that may have trouble.
Two Small-Cap Stocks to Sell:
iHeartMedia (IHRT)
Market Cap: $397.2 million
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ: IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Should You Dump IHRT?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $2.62 per share, iHeartMedia trades at 0.6x forward EV-to-EBITDA. If you’re considering IHRT for your portfolio, see our FREE research report to learn more.
NN (NNBR)
Market Cap: $109.7 million
Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Why Do We Think NNBR Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.6% annually over the last two years
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
NN’s stock price of $2.22 implies a valuation ratio of 62.9x forward P/E. To fully understand why you should be careful with NNBR, check out our full research report (it’s free).
One Small-Cap Stock to Buy:
Axos Financial (AX)
Market Cap: $4.93 billion
Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE: AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.
Why Do We Love AX?
- Annual net interest income growth of 15.9% over the last five years was superb and indicates its market share increased during this cycle
- Differentiated product suite results in a Strong performance of its loan book is reflected in its High-yielding loan book and low cost of funds are reflected in its best-in-class net interest margin of 4.8%
- Earnings per share grew by 18% annually over the last two years and trumped its peers
Axos Financial is trading at $87.29 per share, or 1.6x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 5 Strong Momentum Stocks for this week. 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-micro-cap company Kadant (+351% 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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